Question

On January 1, Easton Company had cash on hand of $115,000. All of January's $244,000 sales were on account. December sales of $230,000 were also all on account. Experience has shown that Easton typically collects 30% of receivables in the month of the sale and the balance the following month. All materials and supplies are purchased on account and Easton has a history of paying for half of these purchases in the month of purchase and half the following month. Such purchases were $156,000 for December and $157,000 for January. All other expenses including wages are paid in the month incurred. These amounted to $42,000 in December and $64,000 in January. Use this information to determine the projected ending balance of cash on hand for January. (Round answer to the nearest whole dollar)

Answer 1

Cash budget for January

Beginning cash balance	115,000
Cash receipts from customers:
- December sales (230,000 x 70%)	161,000
- January sales (244,000 x 30%)	73,200
Total available cash	349,200
Cash payments:
Cash payment to suppliers
- December purchases (156,000 x 1/2)	- 78,000
- January purchases (157,000 x 1/2)	- 78,500
Other expenses	- 64,000
Ending cash balance	128,700

Projected ending balance of cash on hand for January = $128,700

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