Tortilla Corp.has provided a part of its budget for the second quarter: $$\begin{array} { | l | r | r | r | }
\hline & \text { Apr } & \text { May } & \text { Jun } \
\hline \text { Cash collections } & \$ 42,000 & \$ 40,000 & \$ 45,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 6,000 & 7,000 & 5,000 \
\hline \text { Operating expenses } & 7,000 & 9,000 & \
\hline \text { Capital expenditures } & 0 & 4,600 & 4,000 \
\hline
\end{array}$$ 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 May.

Question

Tortilla Corp.has provided a part of its budget for the second quarter: $$\begin{array} { | l | r | r | r | } 
\hline & \text { Apr } & \text { May } & \text { Jun } \
\hline \text { Cash collections } & \$ 42,000 & \$ 40,000 & \$ 45,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 6,000 & 7,000 & 5,000 \
\hline \text { Operating expenses } & 7,000 & 9,000 & \
\hline \text { Capital expenditures } & 0 & 4,600 & 4,000 \
\hline
\end{array}$$ 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 May.

Quizplus · Accepted Answer

The cash balance at the end of May is calculated by adding the cash collections and subtracting the cash payments from the beginning cash balance. Starting with $14,000, add April's collections ($42,000) and May's collections ($40,000), then subtract April's payments ($6,000 + $7,000) and May's payments ($7,000 + $9,000 + $4,600). The result is $62,400.

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