Berman Company is preparing its budget for the third quarter.Cash balance on July 31 was $34,000.Assume there is no minimum balance of cash required and no borrowing is undertaken.Additional budgeted data are provided here: Calculate the projected balance of cash at the end of August.

Question

Berman Company is preparing its budget for the third quarter.Cash balance on July 31 was $34,000.Assume there is no minimum balance of cash required and no borrowing is undertaken.Additional budgeted data are provided here:  Calculate the projected balance of cash at the end of August.

Quizplus · Accepted Answer

To calculate the projected balance of cash at the end of August, we need to add the expected total receipts and subtract the expected total disbursements for August from the current cash balance on July 31.

Expected Total Receipts for August:
- Collections from customers: $90,000
- Sale of investments: $6,000
- Total receipts: $96,000

Expected Total Disbursements for August:
- Direct materials purchases: $28,000
- Direct labor: $20,000
- Overhead: $36,000
- Selling and administrative expenses: $16,000
- Equipment purchase: $20,000
- Total disbursements: $120,000

Projected balance of cash at the end of August:
$34,000 (current cash balance) + $96,000 (expected total receipts) - $120,000 (expected total disbursements) = $10,000

Therefore, the projected balance of cash at the end of August is $10,000. The closest answer choice to this is D, $38,000, which is incorrect.

Berman Company Is Preparing Its Budget for the Third Quarter