Problem 1: Sweet Nothings Ltd. produces designer sweets. Most of its sales are concentrated around holidays such as Valentine's Day, and Christmas. A sales budget is given below for Every Flavor Beans, one of the products that Sweet Nothings purchases from a subcontractor.

Expected Sales in Dollars

July $540,000

August $660,000

September $360,000

In addition...

• 20% of total sales are cash sales, and the rest are sales on credit
• 60% of all credit sales for any given month is collected in the month of sale
• 40% of credit sales are collected in the following month
• The gross profit rate for Every Flavor Beans has generally been 45%
• At the end of each month Bertie Bots wants to maintain an inventory balance equals to 30% of the following month's expected sales (at costs)

show work

1. Determine the cash collections from customers in August

-$124,000

-$621,000

-$594,400

-$448,800

2. Determine the accounts receivable balance at the end of August

-$198,400

-$211,200

-$496,000

-Based on the facts provided, cannot be determined

3.Determine the amount of purchases made during August

-$59,400

-$313,500

-$363,000

-$398,100

4.Additional information for this question only;

-Assume that the cash balance at the end of September is $27,000. Cash collections in October amount to $266,000, and cash disbursements (including interest paid) in October total $300,000. When necessary, Sweet Nothings borrows money from Second National Bank.

-Money can be borrowed and repaid in multiples of $1,000 at annual interest rate of 12%. Simple interest (no compounding) is computed monthly on any outstanding principal, and is paid on the first day of the following month. Sweet Nothings had borrowed $12,000 from Second National Bank at the beginning of September, and had not paid any of it back.

-Sweet Nothing requires a minimum cash balance of $25,000. Determine the amount that Sweet Nothing needs to borrow for the month of October, any interest payments during October, and the ending cash balance on October 31.

-$30,000

-$29,000

-$4,000

-$32,000