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Use the following information to answer questions 27 - 32 Silly Sally, Inc. Silly Sally, Inc....

Use the following information to answer questions 27 - 32

Silly Sally, Inc.

Silly Sally, Inc. forecasts the following sales levels: January, $420; February, $435; March, $450; and April, $470. Historically, 40% of its sales are for cash. Of the remaining sales, 80% are collected in one month, 15% are collected in the second month, while the rest remain uncollected. November sales were $380 and December sales were $500. (all values $000)

Purchases are made at 60% of the next month’s sales forecast, and are paid for in the month of purchase. Other cash outlays are: rent, $10 monthly; wages and salaries, $50 monthly; a tax payment of $30 in March; an interest payment of $15 in March; and a planned purchase of $20 of new fixed assets in January.

27. Refer to Silly Sally, Inc. What is the forecasted amount to be collected from cash sales in March?

  1. $450

  2. $360

  3. $261

  4. $180

28. Refer to Silly Sally, Inc. What are forecasted total cash collection for January?

  1. $420

  2. $442

  3. $168

  4. $240

29. Suppose Silly Sally, Inc. forecasts an ending cash balance of $20, its minimum desired balance, in January. If February’s forecasted cash expenditures are $400, which of the following describes the changes to Silly Sally’s cash balance and level of borrowing, if any, related to its minimum cash balance, at the end of February?

  1. net cash flows of $21; borrowing will increase $21

  2. net cash flows of $21; borrowing will decrease $21

  3. net cash flows of $11; borrowing will increase $9

  4. net cash flows of $11; borrowing will decrease $9

30. What are Silly Sally’s forecasted cash outflows for February?

a. $270 b. $330 c. $395 d. $450

31. What is Silly Sally’s change in cash for March?

  1. $40 increase in cash

  2. $40 decrease in cash

  3. $85 increase in cash

  4. $20 increase in cash

32. Suppose Silly Sally experiences a change in customer payment patterns in accounts receivable, so that payments are now 30% in cash, and of the credit sales, 60% are collected in one month, 35% are collected in the second month, with the rest uncollected. What is the new forecasted collection for January, and how much is this different from the original forecast?

  1. $408; $72 higher

  2. $336; $93 lower

  3. $442; $13 higher

  4. $429; $13 lower

Solutions

Expert Solution

Month November December January February March April
sales 380 500 420 435 450 470
purchase-60% of next month sales 300 252 261 270 282
cash collection
cash sales -40% of the month sale 168 174 180 188
collection of credit sales-60% of month sales
80% of credit sales in the first month of sales 240 202 209 216
15% of credit sales in the second month of sales 34.2 45 38 39
total credit sales collection 274.2 247 247 255
total cash collection = cash sales collection+total credit sales collection 442.2 421 427 443
disbursement:
payment towards purchase 168 270 282 188
rent 10 10 10 10
wages and salaries 50 50 50 50
tax payment 30
interest payment 15
purchase of fixed asset 20
total disbursement of expense 248 330 387 248
net cash available = total cash collection-total disbursement of expenses 194.2 91 40 195
27- What is the forecasted amount to be collected from cash sales in March 180
28- What are forecasted total cash collection for January 442
29- total cash collection+minimum cash balance-payment in february-minimum cash balance 421+20-400-20 21 net cash flows of $21; borrowing will decrease $21
30- What are Silly Sally’s forecasted cash outflows for February 330
31- What is Silly Sally’s change in cash for March 40 increase in cash
32- What is the new forecasted collection for January, and how much is this different from the original forecast 442-429 13 429,13 lower
33-
November December January
380 500 420
300 252 0
cash collection January
cash sales -30% of the month sale 420*30% 126
collection of credit sales-70% of month sales
60% of credit sales in the first month of sales 500*70%*60% 210
35% of credit sales in the second month of sales 380*70%*35% 93.1
total credit sales collection 303.1
total cash collection = cash sales collection+total credit sales collection 429.1 0

jeff jeffy answered 1 year ago
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