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Disbursements, Receipts, Cash Balance

Table 2 (use for Problems 29-31)
Thompson Manufacturing Supplies' projected sales for the first six months of 2004 are given below.
Jan. $250,000 April $400,000
Feb. $300,000 May $450,000
March $400,000 June $400,000

40% of sales is collected in the month of the sale, 50% is collected in the month following the sale, and 10% is written off as uncollectible. Cost of goods sold is 70% of sales. Purchases are made the month prior to the sale and are paid during the month the purchases are made (i.e. goods sold in March are bought and paid for in February). Total other cash expenses are $50,000/month. The company's cash balance as of February 1, 2004 will be $40,000. Excess cash will be used to retire short-term borrowing (if any). Thompson has no short-term borrowing as of February 28, 2004. Assume that the interest rate on short-term borrowing is 1% per month. The company must have a minimum cash balance of $25,000 at the beginning of each month. Round all Answers to the nearest $100.

29. Based on the information in Table 2, what are Thompson's projected total disbursements for April?
a. $365,000
b. $315,000
c. $5,000
d. $96,607

30. Based on the information in Table 2, what are Thompson's projected total receipts (collections) for March?
a. $400,000
b. $310,000
c. ($20,000)
d. None of the above

31. Based on the information in Table 2, what is Thompson's projected cash balance as of April 1, 2004?
a. $32,000
b. $4,300
c. $25,000
d. None of the above

Solution Summary

This solution explains how to calculate total disbursements, total collections, and the projected cash balance for various months based on sales and inventory costs for several months.

$2.19