Question

KOGURYU Corporation, a merchandising company, has provided the following budget data:

		Purchases	Sales
January		$ 42,000	$72,000
February		48,000	66,000
March		36,000	60,000
April		54,000	78,000
May		60,000	66,000

Collections from customers are normally 70% in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The balance is expected to be uncollectible. Montero pays for purchases in the month following the purchase. Cash disbursements for expenses other than merchandise purchases are expected to be $13,400 for May. KOGURYU's cash balance on May 1 was $22,000.

Instructions

a) Compute the expected cash collections during May.   
b) Compute the expected cash balance on May 31.

Answer 1

a) Cash collection during May
Sales
	$
Cash collection of Sale during May (70% of 66000)	46,200
Cash collection of Sale during April (20% of 78000)	15,600
Cash collection of Sale during March (8% of 60000)	4,800
Cash collection during May	66,600
b) Cash balance on May 31
Opening cash balance	22,000
Add:Cash collection during May	66,600
Total cash available	88,600
Less: Cash expense
Payment for purchases made for the month of April	54,000
Expenses other than merchandise purchases	13,400
Total cash expense	67,400
Cash balance as on May 31	21,200
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