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Cash Budgets

Acme Corporation, a wholesaler, provided the following information:

Month Merchandise Purchases Sales
January $142,000 $172,000
February 148,000 166,000
March 136,000 160,000
April 154,000 178,000
May 160,000 166,000

Customers pay 70% of their balances in the month of sale, 20% in the month following sale, and 10% in the second month following sale. The company pays all invoices in the month following purchase and takes advantage of a 2% discount on all amounts due. Cash payments for operating expenses in May will be $114,400; Quaker's cash balance on May 1 was $122,000.

Required:
Determine the following:
A. Expected cash collections during May.
B. Expected cash disbursements during May.
C. Expected cash balance on May 31.

I cannot see how to work backwards on this problem because the cash balance given is for the final month and no begining cash balance is given.

Solution Summary

The solution calculates expected cash collections, expected cash disbursements and expected cash balance

$2.19