Duffy Corp. has provided a part of its budget for the second quarter: $$\begin{array} { | l | r | r | r | }
\hline & { \text { Apr } } &{ \text { May } } & { \text { Jun } } \
\hline \text { Cash collections } & \$ 40,000 & \$ 40,000 & \$ 40,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 6000 & 7200 & 4500 \
\hline \text { Operating expenses } & 6000 & 7900 & 7000 \
\hline \text { Capital expenditures } & 0 & 10,000 & 0 \
\hline
\end{array}$$ The cash balance on April 1 is $14,000. Assume that there will be no financing transactions or costs during the quarter. Calculate the projected cash balance at the end of April.

Question

Duffy Corp. has provided a part of its budget for the second quarter: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { Apr } } &{ \text { May } } &  { \text { Jun } } \
\hline \text { Cash collections } & \$ 40,000 & \$ 40,000 & \$ 40,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 6000 & 7200 & 4500 \
\hline \text { Operating expenses } & 6000 & 7900 & 7000 \
\hline \text { Capital expenditures } & 0 & 10,000 & 0 \
\hline
\end{array}$$ The cash balance on April 1 is $14,000. Assume that there will be no financing transactions or costs during the quarter. Calculate the projected cash balance at the end of April.

Quizplus · Accepted Answer

The provided budget is not relevant to calculating the projected cash balance at the end of April. Since there will be no financing transactions or costs during the quarter, the cash balance at the end of April will be the same as the beginning cash balance of $14,000 plus any cash inflows and minus any cash outflows during the month. Without any additional information provided, we cannot determine the exact amount of the cash inflows and outflows for the month of April, but we can assume that they will be less than or equal to the budgeted cash inflows and outflows for the quarter. Therefore, the projected cash balance at the end of April should be between $14,000 and $42,000, which corresponds to option C.

Duffy Corp The Cash Balance on April 1 Is $14,000