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.

  

  

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

  

  

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.

Month Credit Sales January $ 300,000 (actual) February 400,000 (actual) March 559,000 (estimated) April 584,000 (estimated) May 800,000 (estimated)

Explanation / Answer

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

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