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 435,000 (estimated) April 887,000 (estimated) May 800,000 (estimated)

Explanation / Answer

cash Budget (Amount in $ ) particulars january february march april may Cash opening balance 500000 482500 716500 Receipts: Credit sales : january(300000) 150000 90000 45000 - - February (400000) - 200000 120000 60000 - march(435000) - - 217500 130500 65250 April (887000) - - - 443500 266100 May (800000) - - - - 400000 Less: Cash expenditure 400000 400000 400000 Closing cash balance 482500 716500 1047850

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