Question

Morgan Company's budgeted income statement reflects the following amounts:

	Sales			Purchases			Expenses
January	$	129,000		$	87,000		$	24,900
February		119,000			75,000			25,100
March		134,000			90,250			27,900
April		139,000			93,500			29,500

Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the second month following sale. One percent of sales is uncollectible and expensed at the end of the year.

Morgan pays for all purchases in the month following purchase and takes advantage of a 3% discount. The following balances are as of January 1:

Cash	$	97,000
Accounts receivable*		67,000
Accounts payable		81,000

^*Of this balance, $40,200 will be collected in January and the remaining amount will be collected in February.

The monthly expense figures include $5,900 of depreciation. The expenses are paid in the month incurred.

Morgan’s expected cash balance at the end of January is:

Multiple Choice

• $94,200.

• $98,230.

• $100,100.

• $104,130.

• $123,130.

Answer 1

Cash collection in January
accounts receivable				40,200
jan sales	(129000*50%)			64500
total cash collection					104,700
cash at beginning					97,000
total cash receipts					201,700
less:
Cash disbursement
Accounts payable		(81000*97%)			78570
Expenses		(24900-5900)			19000
total disbursement					97570
Cash balance at end of jan					104,130	answer