A Vancouver firm has a cash balance of $12,000 as of June 1. During the month they paid $16,000 on account, $13,000 for wages, and $1,000 for other expense items. The company maintains a minimum cash balance of $10,000. Sales for the firm for April, May, and June are $15,000, $22,000, and $18,750, respectively. The company collects 40% of sales in the month of sale, 50% in the following month, and 10% in the second month following the month of sale. What is the cash surplus or deficit as of June 30?

Question

Quizplus · Accepted Answer

The firm starts with $12,000. They pay out $16,000 + $13,000 + $1,000 = $30,000. Cash collected in June is 40% of June sales ($18,750) + 50% of May sales ($22,000) + 10% of April sales ($15,000), which totals $7,500 + $11,000 + $1,500 = $20,000. The net cash flow is $12,000 + $20,000 - $30,000 = $2,000. Since the minimum cash balance is $10,000, the deficit is $10,000 - $2,000 = $8,000.

A Vancouver Firm Has a Cash Balance of $12,000 as of June