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6 December, 10:15

Tortilla Corp. has provided a part of its budget for the second quarter: Apr May JunCash collections $40,000 $40,000 $42,000Cash payments: Purchases of direct materials 7,200 7,000 4,500Operating expenses 7,000 7,000 Capital expenditures 10,000 4,000 20,000The 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: (A) $51,800 (B) $69,800 (C) $54,000 (D) $18,000

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  1. 6 December, 11:25
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    The correct option is A

    Explanation:

    For the month of April

    Receipts = Opening + Collection

    = $14,000 + $40,000

    = $54,000

    Payments = Purchases of direct materials + Operating expense + Capital expenditure

    = $7,200 + $7,000 + $10,000

    = $24,200

    Closing Balance = Receipts - Payments

    = $54,000 - $24,200

    = $29,800

    For the month of May

    Receipts = Opening + Collection

    = $29,800 + $40,000

    = $69,800

    Payments = Purchases of direct materials + Operating expense + Capital expenditure

    = $7,000 + $7,000 + $4,000

    = $18,000

    Closing Balance = Receipts - Payments

    = $69,800 - $18,000

    = $51,800

    Projected cash balance at the end of May is $51,800
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