Question

On March 1 of the current year, Spicer Corporation compiled information to prepare a cash budget for March, April, and May. All of the company’s sales are made on account. The following information has been provided by Spicer’s management.

  

Month	Credit Sales
January	$	300,000	(actual)
February		400,000	(actual)
March		428,000	(estimated)
April		805,000	(estimated)
May		800,000	(estimated)

  

The company’s collection activity on credit sales historically has been as follows.

  

Collections in the month of the sale	50	%
Collections one month after the sale	30
Collections two months after the sale	15
Uncollectible accounts	5

  

Spicer’s total cash expenditures for March, April, and May have been estimated at $1,200,000 (an average of $400,000 per month). Its cash balance on March 1 of the current year is $500,000. No financing or investing activities are anticipated during the second quarter.

  

Compute Spicer’s budgeted cash balance at the ends of March, April, and May.

Cash balance on March 31?

Cash balance on April 30?

Cash balance on May 31?

Answer 1

1	Sales budget	March	April	May	Quarter
	Sales	428000	805000	800000	2033000
2	Budgeted Cash receipt	March	April	May	Quarter
	February sales	45000			45000
	March sale	120000	60000		180000
	April sales	214000	128400	64200	406600
	May sales		402500	241500	644000
	June sales			400000	400000
	Total collection	379000	590900	705700	1675600
3	Cash budget
		March	April	May	Quarter
	Beginning cash balance	5,00,000	4,79,000	6,69,900	5,00,000
Add	Cash collections	379000	590900	705700	1675600
	Total collections	8,79,000	10,69,900	13,75,600	21,75,600
Less	Cash disbursements	400000	400000	400000	1200000
	Ending cash balance	4,79,000	6,69,900	9,75,600	9,75,600