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 January $300,000 (actual) February 400,000 (actual) March 600,000 (estimated) April 700,000 (estimated) May 800,000 (estimated) The company's collection activity on credit sales historically has been as follows. 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 a 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.
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 January $300,000 (actual) February 400,000 (actual) March 600,000 (estimated) April 700,000 (estimated) May 800,000 (estimated) The company's collection activity on credit sales historically has been as follows. 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 a 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:Budgeting an Ending Cash Balance
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
January $300,000 (actual)
February 400,000 (actual)
March 600,000 (estimated)
April 700,000 (estimated)
May 800,000 (estimated)
The company's collection activity on credit sales historically has been as follows.
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 a 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.
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