Reference no: EM132993669

Morgan Company's budgeted income statement reflects the following amounts:

                        Sales                 Purchases                  Expenses

January          $ 111,000           $ 69,000                 $ 23,100

February           101,000               57,000                   23,300

March                  116,000               72,250                26,100

April                        121,000               75,500                 27,700

Sales are collected 50% in the month of sale, 25% in the month following sale, and 24% in the second month following sale. One percent of sales is uncollectible and expensed at the end of the year.

Morgan pays for all purchases in the month following purchase and takes advantage of a 2% discount. The following balances are as of January 1:

Cash $ 79,000

Accounts receivable* 49,000

Accounts payable 63,000

Of this balance, $24,500 will be collected in January and the remaining amount will be collected in February.

The monthly expense figures include $4,100 of depreciation. The expenses are paid in the month incurred.

Problem 1: Morgan's expected cash balance at the end of January is