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Posted on Oct 03, 2024

Use the following information to answer questions 27 - 32 Silly Sally, Inc. Silly Sally, Inc. forecasts the following sales levels: January, $420; February, $435;

Use the following information to answer questions 27 - 32

Silly Sally, Inc.

Silly Sally, Inc. forecasts the following sales levels: January, $420; February, $435; March, $450; and April, $470. Historically, 40% of its sales are for cash. Of the remaining sales, 80% are collected in one month, 15% are collected in the second month, while the rest remain uncollected. November sales were $380 and December sales were $500. (all values $000)

Purchases are made at 60% of the next months sales forecast, and are paid for in the month of purchase. Other cash outlays are: rent, $10 monthly; wages and salaries, $50 monthly; a tax payment of $30 in March; an interest payment of $15 in March; and a planned purchase of $20 of new fixed assets in January.

27. Refer to Silly Sally, Inc. What is the forecasted amount to be collected from cash sales in March?

$450
$360
$261
$180

28. Refer to Silly Sally, Inc. What are forecasted total cash collection for January?

$420
$442
$168
$240

29. Suppose Silly Sally, Inc. forecasts an ending cash balance of $20, its minimum desired balance, in January. If Februarys forecasted cash expenditures are $400, which of the following describes the changes to Silly Sallys cash balance and level of borrowing, if any, related to its minimum cash balance, at the end of February?

net cash flows of $21; borrowing will increase $21
net cash flows of $21; borrowing will decrease $21
net cash flows of $11; borrowing will increase $9
net cash flows of $11; borrowing will decrease $9

30. What are Silly Sallys forecasted cash outflows for February?

a. $270 b. $330 c. $395 d. $450

31. What is Silly Sallys change in cash for March?

$40 increase in cash
$40 decrease in cash
$85 increase in cash
$20 increase in cash

32. Suppose Silly Sally experiences a change in customer payment patterns in accounts receivable, so that payments are now 30% in cash, and of the credit sales, 60% are collected in one month, 35% are collected in the second month, with the rest uncollected. What is the new forecasted collection for January, and how much is this different from the original forecast?