Question

Hilliard Company budgeted the following transactions for April Year 2: Sales (758 collected in month of sale)

Cash operating expenses $200,000
Cash purchases of investments 105,000
Cash payment of debt 75,000
Depreciation on operating assets 15,000 12,000
The beginning cash balance was $50,000.
The company desires to have a $25,000 ending cash balance.
The surplus (or shortage) of cash before considering any borrowings in April would be:
a)$40,000 surplus
b)$40,000 shortage
c)$20,000 shortage
d)There is no cash surplus or shortage.

Answer 1

The surplus (or shortage) of cash before considering any borrowings in April for Hilliard Company would be a $40,000 surplus.

Step-by-step explanation:

To determine the surplus or shortage of cash for the Hilliard Company, we need to calculate the net cash flow for April Year 2. We start with the beginning cash balance of $50,000 and add the cash collected from sales ($758). Then, we subtract the cash operating expenses ($200,000), cash purchases of investments ($105,000), cash payment of debt ($75,000), and depreciation on operating assets ($15,000). Finally, we subtract the desired ending cash balance ($25,000) from the result.

Calculation:
Beginning Cash Balance + Cash Collected from Sales - Cash Operating Expenses - Cash Purchases of Investments - Cash Payment of Debt - Depreciation on Operating Assets - Desired Ending Cash Balance

Answer: The surplus (or shortage) of cash before considering any borrowings in April for Hilliard Company would be a) $40,000 surplus.