Verle, Inc. has a cash balance of $20,000 on April 1. The company is now preparing the cash budget for the second quarter. Budgeted cash collections and payments are as follows: $$\begin{array} { | l | r | r | r | }
\hline & { \text { Apr } } & { \text { May } } & { \text { Jun } } \
\hline \text { Cash collections } & \$ 25,000 & \$ 24,000 & \$ 25,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 5800 & 5800 & 7000 \
\hline \text { Operating expenses } & 3500 & 5000 & 5300 \
\hline
\end{array}$$ There are no budgeted capital expenditures or financing transactions during the quarter. Based on the above data, calculate the projected cash balance at the end of May.

Question

Verle, Inc. has a cash balance of $20,000 on April 1. The company is now preparing the cash budget for the second quarter. Budgeted cash collections and payments are as follows: $$\begin{array} { | l | r | r | r | } 
\hline &  { \text { Apr } } & { \text { May } } & { \text { Jun } } \
\hline \text { Cash collections } & \$ 25,000 & \$ 24,000 & \$ 25,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 5800 & 5800 & 7000 \
\hline \text { Operating expenses } & 3500 & 5000 & 5300 \
\hline
\end{array}$$ There are no budgeted capital expenditures or financing transactions during the quarter. Based on the above data, calculate the projected cash balance at the end of May.

Quizplus · Accepted Answer

The projected cash balance at the end of May is calculated as follows:- Starting cash balance in April: $20,000- Cash collections in April: $25,000- Cash payments in April: Purchases of direct materials ($5,800) + Operating expenses ($3,500) = $9,300- Net cash flow in April: $25,000 - $9,300 = $15,700- Ending cash balance in April (also the starting balance for May): $20,000 + $15,700 = $35,700- Cash collections in May: $24,000- Cash payments in May: Purchases of direct materials ($5,800) + Operating expenses ($5,000) = $10,800- Net cash flow in May: $24,000 - $10,800 = $13,200- Ending cash balance in May: $35,700 + $13,200 = $48,900.

Verle, Inc There Are No Budgeted Capital Expenditures or Financing Transactions During