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    Cash receipts and cash balance

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    The Airhart Company's budgeted income statement reflects the following amounts:

    Sales Purchases Expenses

    January $190,000 $78,000 $34,000
    February 150,000 66,000 24,200
    March 125,000 81,250 27,000
    April 130,000 84,500 28,600

    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 are uncollectable and expensed at the end of the year. Airhart pays for all purchases in the month following purchase and takes advantage of a 3% discount. The following balances are as of January 1st:

    Cash $88,000
    Accounts Receivable* 58,000
    Accounts Payable 72,000

    (*Of this balance, $35,000 will be collected in January and the remaining amount will be collected in February) The monthly expense figures include $5,000 of depreciation. The expenses are paid in the months incurred.

    A) Airhart's expected cash balance at the end of January is:

    B) Airhart's budgeted cash receipts in February are:

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    Solution Summary

    The solution explains how to calculate the cash receipts and the expected cash balance.