A corporation has a 30 day average collection period and wishes to maintain a $
ID: 2744727 • Letter: A
Question
A corporation has a 30 day average collection period and wishes to maintain a $ 5 million minimum cash balance. Based on this and the following info answer questions 3-5. The company has quarterly budgets. Beginning receivables of $120 Million and sales as follows : Q1 90M Q2 120 M Q3 150M Q4 120M. Total cash disbursement Q1 (80) Q2 (160) Q3 ( 180 ) Q4 ( 160M ). The beginning cash balance of the company is $5 Million.
1. What is the ending receivables in the second quarter?
a. $90 Million
b. $80 Million
c. $60 Million
d. $40 Million
2. What is net cash inflow in the 3rd quarter?
a. -$60 million
b. -$40 million
c. -$20 million
d. -$40 million
3. What is the cumulative surplus ( deficit ) in the fourth quarter?
a. -$60 million
b. $10 million
c. -$20 million
d. -$40 million
Explanation / Answer
every Quarter Receivables=Beginning receivables +Quarter sales*2 months/3
Closing balance of Receivables=Quarter Sales*1/3
1.
the ending receivables in the second quarter-$40 million
2.
net cash inflow in the 3rd quarter=$140 milliom-$180 million=-$40 million
3.
the cumulative surplus ( deficit ) in the fourth quarter=-$20 milion
Cash Budget ($ in Million) Particulars Quarter-1 Quarter-2 Quarter-3 Quarter-4 Sales 90 120 150 120 Ending Balance of Recivables(Quarter sales*1/3) 30 40 50 40 Opening Balance of Receivables-A 120 30 40 50 Curret Quarter Receivables((Quarter sales*2/3)-B 60 80 100 80 Opening Balance 5 105 55 15 Add: Receivables(A+B) 180 110 140 130 Less: Payments 80 160 180 160 closing balance Balance before adustment-1 105 55 15 -15 Borrowings /Payments-3(2-1) - - - 20 Clsoing Balance after adjustment-(1+3) 105 55 15 5Related Questions
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