Reference no: EM133113404
Question - Information on the actual sales and inventory purchases of the Law Company for the first quarter follow:
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Inventory Sales
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Purchases
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January
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$120,000
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$60,000
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February
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100,000
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78,000
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March
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130,000
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90,000
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Collections from Law Company's customers are normally 60% in the month of sale, 30% in the month following sale, and 8% in the second month following sale. The balance is uncollectible. Law Company takes full advantage of the 3% discount allowed on purchases paid for by the end of the following month.
The company expects sales in April of $150,000 and inventory purchases of $100,000. Operating expenses for the month of April are expected to be $38,000, of which $15,000 is salaries and $8,000 is depreciation. The remaining operating expenses are variable with respect to the number of sales in dollars. Those operating expenses requiring a cash outlay are paid for during the month incurred. Law Company's cash balance on March 1 was $43,000, and on April 1 was $35,000.
Required -
1. What would be the expected cash collections from customers during April?
A. $117,600.
B. $137,000.
C. $139,000.
D. $150,000.
2. What would be the expected cash disbursements during April for inventory purchases?
A. $87,300.
B. $90,000.
C. $97,000.
D. $100,000.
3. What would be the expected cash disbursements during April for operating expenses?
A. $15,000.
B. $23,000.
C. $30,000.
D. $38,000.
4. What would be the expected cash balance on April 30?
A. $19,700.
B. $28,700.
C. $54,700.
D. $62,700.
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