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Cash Budgets

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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.

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Solution Summary

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

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