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		559,000	(estimated)
April		584,000	(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.

Answer 1

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

	March	April	May
January sales	45000
February sales	120000	60000
March sales	279500	167700	83850
April Sales		292000	175200
May sales			400000
Total budgeted cash receipts	444500	519700	659050
Beginning cash balance	500000	544500	664200
Total cash available	944500	1064200	1323250
Cash payment	(400000)	(400000)	(400000)
Ending cash balance	544500	664200	923250