Question

Hurzdan, Inc., has a 30-day average collection period and wants to maintain a minimum cash balance of $20 million, which is what the company currently has on hand. The company currently has a receivables balance of $196 million and has developed the following sales and cash disbursement budgets (in millions):

Q1 Q2 Q3 Q4
Sales $441 $513 $594 $558
Total cash disbursement 368 465 720 456

Required:
Draw the cash budget table for the company.

Answer 1

Hurzdan, Inc.

Cash Budget

Beginning balance $20 -$152 -$176 -$383

Cash collection 196 441 513 594

Cash available $216 $289 $337 $211

Cash disbursement 368 465 720 456

Ending balance -152 -176 -383 -245

Minimum cash balance 20 20 20 20

Cash requirement $172 $196 $403 $265

Step-by-step explanation:

a) Data and Calculations:

Average collection period = 30 days

Required minimum cash balance = $20 million

Cash, beginning balance = $20 million

Accounts receivable, beginning balance = $196 million

(in millions): Q1 Q2 Q3 Q4

Sales revenue $441 $513 $594 $558

Cash collection $196 $441 $513 $594

Cash disbursement 368 465 720 456