Walter Enterprises expects its September sales to be 20% higher than its August sales of $150,000. Purchases were $100,000 in August and are expected to be $120,000 in September. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Merchandise purchases are paid as follows: 25% in the month of purchase and 75% in the following month. The beginning cash balance on September 1 is $7,500. The ending cash balance on September 30 would be:

The ending balance for September month is $61,500

Explanation:

For computing the ending balance, the following equation should be used which is shown below:

= Beginning cash balance + cash receipts - cash payments

where,

Beginning cash balance = $7,500

Cash receipts:

30% of September sale, where September sale is equals to

= august sale * 120 %

= $150,000 * 120%

= $180,000

So,

30% of September sale = $180,000 * 30% = $54,000

70% of august sale

= $150,000 * 70%

= $105,000

So, the September cash receipts is equals to

70% of august sale + 30 % of September sale

= $105,000 + $54,000

= $159,000

Cash payments:

25 % of September purchase

= $120,000 * 25%

= $30,000

75% of august purchase

= 75% * $100,000

= $75,000

So, the cash payment of September is equals to

= 25% of September purchase + 75 % of august purchase

= $30,000 + $75,000

=$105,000

Now put these values on the above equation

So, the ending balance would be

= $7,500 + $159,000 - $105,000

= $61,500

Hence, the ending balance for September month is $61,500