Hutchinson,Inc.provides the following data taken from its third quarter budget: $$\begin{array} { | l | r | r | r | }
\hline & { \text { Jul } } & { \text { Aug } } &{ \text { Sep } } \
\hline \text { Cash collections } & \$ 68,000 & \$ 34,000 & \$ 42,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 31,000 & 32,000 & 25,000 \
\hline \text { Operating expenses } & 11,000 & 19,000 & 20,000 \
\hline \text { Capital expenditures } & 0 & 34,000 & 7000 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $12,000.Based on the above data,calculate the shortfall the company is projected to have at the end of August.
A) $34,000
B) $23,000
C) $13,000
D) $38,000

Question

Hutchinson,Inc.provides the following data taken from its third quarter budget: $$\begin{array} { | l | r | r | r | } 
\hline &  { \text { Jul } } & { \text { Aug } } &{ \text { Sep } } \
\hline \text { Cash collections } & \$ 68,000 & \$ 34,000 & \$ 42,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 31,000 & 32,000 & 25,000 \
\hline \text { Operating expenses } & 11,000 & 19,000 & 20,000 \
\hline \text { Capital expenditures } & 0 & 34,000 & 7000 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $12,000.Based on the above data,calculate the shortfall the company is projected to have at the end of August.
A) $34,000
B) $23,000
C) $13,000
D) $38,000

Quizplus · Accepted Answer

The shortfall at the end of August is calculated as follows: Starting with a cash balance of $12,000 in June, add July's cash collections ($68,000) and subtract July's total cash payments (Purchases of direct materials $31,000 + Operating expenses $11,000), resulting in a cash balance at the end of July. Then, add August's cash collections ($34,000) to this balance and subtract August's total cash payments (Purchases of direct materials $32,000 + Operating expenses $19,000 + Capital expenditures $34,000). This results in a shortfall of $13,000 at the end of August.

Hutchinson,Inc The Cash Balance on June 30 Is Projected to Be