Question

On March 31, 2023, Intelligent Printing had a cash balance of $20,000. The following information is available for the month of April:

Budgeted sales: $100,000
Cost of goods sold: 60% of sales
Operating expenses: $20,000
Accounts receivable collections: 80% of sales
Accounts payable payments: 70% of purchases
Planned purchases: $60,000
What is the budgeted cash balance for Intelligent Printing at April 30?
a. $34,000
b. $38,000
c. $42,000
d. $46,000

Answer 1

The budgeted cash balance for Intelligent Printing at April 30, 2023, can be found by adding the cash inflows to the starting balance of $20,000 and then subtracting the cash outflows. After calculating, the budgeted cash balance is determined to be $38,000.

Step-by-step explanation:

To calculate the budgeted cash balance for Intelligent Printing at April 30, we need to consider the beginning cash balance, the cash inflows, and the cash outflows during the month of April.

The beginning cash balance on March 31, 2023, is $20,000.

For the cash inflows:

• Accounts receivable collections are 80% of sales, which is 80% of $100,000, equaling $80,000.

For the cash outflows:

• The cost of goods sold is 60% of sales, so purchases would be $60,000 (since the cost of goods sold percentage is based on sales and purchases are given, indicating purchases equals the cost of goods sold for this budget).
• Accounts payable payments are 70% of purchases, which is 70% of $60,000, equaling $42,000.
• Operating expenses for April are $20,000.

The total cash outflows for April are therefore $42,000 for payable payments plus $20,000 for operating expenses, which sum up to $62,000.

Now, we can determine the ending cash balance:

Beginning cash balance + Cash inflows - Cash outflows equals the budgeted cash balance at April 30.

So, $20,000 + $80,000 - $62,000 = $38,000.

The budgeted cash balance for Intelligent Printing at April 30 is $38,000, which corresponds to option b.