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Expected cash balance

MacKenzie Ltd. expects the following transactions and events to take place in the upcoming

Year 3:
Sales projected for Year 3 $2,400,000 (10% of all sales are cash sales, 60% of the remaining sales are collected in the following year and the remainder in the 3rd year)

Total Sales Year 2 $1,500,000
Total Sales Year 1 $2,000,000
The following are all projections for Year 3
Proceeds from bond issue $1,000,000
Cost of goods sold $1,200,000
Disbursements for inventory purchases and operating costs $1,500,000
Payment of income taxes $200,000
Depreciation of assets $200,000
Bad debt expense $50,000
Gain on sale of fixed asset NBV at time of sale was $150,000 $50,000

Based on this information what is the expected cash balance at the end of Year 3 assuming an opening balance of $400,000?

a. $320,000
b. $470,000
c. $1,520,000
d. $1,670,000
e. $1,840,000

Solution Preview

Opening cash balance = 400,000
Add: collections
10% of year 3 sales = 2,400,000X10% = 240,000
60% of remaining year 2 sales = 1,500,000X.9 X 60% = 810,000 (10% is cash and so 90% is remaining)
40% of ...

Solution Summary

The solution explains the calculation of expected cash balance at the end of year 3.

$2.19