Florida Company has the following sales forecasts for the selected three-month p
ID: 2485627 • Letter: F
Question
Florida Company has the following sales forecasts for the selected three-month period in the current year:
Month Sales
April $24,000
May 14,000
June 16,000
Collection pattern: 70% of sales are collected in the month of the sale, 30% is collected in the following month. Accounts Receivable balance(April 1): $20,000Cash balance (April 1): $10,000
Minimum cash balance is $10,000. Cash can be borrowed in $1,000 increments from the local bank (assume no interest charges). Using the table below,Calculate the expected cash balance at the end of April, assuming that cash is received only from customers and that $40,000 is paid out during April?
Beginning cash balance
Collections: April 1 Accounts Receivables balance 70% × April sales (0.70 × $24,000) Expenditures
Expected ending balance before
borrowing
Borrowings in April
Ending cash balance
Explanation / Answer
Cash budget:
Note: The total sale for March is not given as 30% on total sales in March will be collected in April so the opening balance of accounts receivable is assumed as 30% credit sale in March.
Particulars April ($) Opening balance of cash 10,000 Add: Collections of cash: Cash sales ($24,000*70/100) 16,800 Add: March sales collected at 30% (Accounts receivable opening balance) 20,000 Total cash collections 36,800 Total cash available before deducting cash expenses 46,800 Less: Cash expenses -40,000 Total cash available after deducting cash expenses 6,800 Loan to be borrowed ($10,000 - $6,800) 3,200 Budgeted ending balance 10,000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.