The treasurer of Simmons Corporation, a newly foed stware company is trying to S

Question

The treasurer of Simmons Corporation, a newly foed stware company is trying to Simmons cash flows for the next three months. Expected sales are company is trying to ascertain January February March Expected Sales $200 $220 $300 50% of sales are made for cash. Simmons expects to receive 25% in the and 20% in the second month following the sale. The remaining 5% are Gross margin is 20% and purchases are made one month prior to sale. Purchases are month after received. month following the sale expected to be un-collectible paid one 11. The cash inflows in March from sales will be: A $250. B, $245 C. $220 D. None of the above 12. Cash outflows in March for purchases will be: $240. B. $220 C. $200. D. $176.

Explanation / Answer

Cash inflow march March sales (300*50%) 150 feb (220*25%) 55 jan (200*20%) 40 total cash inflow 245 answer option B is the correct answer cash outflow purchase made in feb is for march sales and cost of goods sold is 100-20%=80% so 300*80% = $240 purchases to be mage in feb which will be paid in marcj hence option A $240 is the correct answer

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