Question

Blue Spruce Corporation is projecting a cash balance of $27,000 in its December 31,2021 , balance sheet. Blue Spruce's schedule of expected collections from customers for the first quarter of 2022 shows total collections of $183,000. The schedule of expected payments for direct materials for the first quarter of 2022 shows total payments of $44,000.0 ther information gathered for the first quarter of 2022 is as follows: sale of equipment $3,000; direct labour $64,000, manufacturing overhead $34,000; selling and administrative expenses $49,000; and purchase of securities $12,000. Blue Spruce wants to maintain a balance of at least $24,000 cash at the end of each quarter. Prepare a cash budget for the first quarter:

Answer 1

To prepare a cash budget for the first quarter, calculate the cash inflows and outflows. The net cash inflow is $7,000 and the ending cash balance is $34,000.

Step-by-step explanation:

To prepare a cash budget for the first quarter, we need to calculate the cash inflows and outflows during this period.

1. Cash inflows:

- Total collections from customers: $183,000

- Sale of equipment: $3,000

- Purchase of securities: $12,000

Total cash inflows: $198,000

2. Cash outflows:

- Direct materials payments: $44,000

- Direct labor: $64,000

- Manufacturing overhead: $34,000

- Selling and administrative expenses: $49,000

Total cash outflows: $191,000

3. Net cash inflow/outflow:

- Net cash inflow = Total cash inflows - Total cash outflows

- Net cash inflow = $198,000 - $191,000 = $7,000

4. Ending cash balance:

- Ending cash balance = Beginning cash balance + Net cash inflow

- Beginning cash balance = $27,000 (given)

- Ending cash balance = $27,000 + $7,000 = $34,000

However, Blue Spruce wants to maintain a minimum cash balance of $24,000 at the end of each quarter. Since the calculated ending cash balance is higher than the minimum requirement, the cash budget for the first quarter is acceptable.