Coastal Coffee Distributors Ltd. has sales revenue of $750,000, $850,000, $550,000 and $450,000 from June through September. The company's collection pattern is to collect 20% of sales in the first 30 days, 70% in the next 30 days and 10% in the 30 days after that. There are monthly interest and fixed expenses of $245,500. Variable costs which equal 55% of Sales Revenue comprise accounts payable and are paid the month after they are incurred. There is a cash surplus in July of $49,000. In August the company will require a $90,000 down payment for new vehicles being purchased and in September it will make a 3rd quarter income tax payment of $16,500. After generating the Cash Flow Budget, what will be September's cash balance?

Question

Quizplus · Accepted Answer

September's cash balance will be a surplus of $21,500. This is calculated by taking the cash balance from August ($127,000), subtracting the down payment for new vehicles ($90,000), adding the cash collections for September ($133,000), and then subtracting the income tax payment ($16,500).