On March 1 of the current year, Spicer Corporation compiled information to prepa

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 Jan. . . .. . $300,000 (actual) Feb. . . . . . . 400,000 (actual) Mar. . . . . . 600,000 (estimated) Apr. . . . . . . . 700,000 (estimated) May. . .800,000 (estimated 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

Explanation / Answer

jan feb march april May TOTAL SALES 300000 400000 600000 700000 800000 50 % IN MONTH OF SALES 300000 350000 400000 30% IN FIRST MONTH AFTER SALES 120000 180000 210000 15% IN SECOND MONTH AFTER SALES 45000 60000 90000 TOTAL COLLECTION OF CASH 465000 590000 700000 TOTAL ESTIMATED EXPENDITURE 400000 400000 400000 CASH AFTER EXPENDITURE 65000 190000 300000 OPENING CASH BALANCE 500000 565000 755000 CASH BALANCE AT END 565000 755000 1055000

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