Carver Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow:
- Sales are budgeted at $450,000 for November, $380,000 for December, and $280,000 for January.
- Collections are expected to be 87% in the month of sale, 8% in the month following the sale, and 5% uncollectible.
- The cost of goods sold is 69% of sales.
- The company purchases 60% of its merchandise in the month prior to the month of sale and 40% in the month of sale. Payment for merchandise is made in the month following the purchase.
- Other monthly expenses to be paid in cash are $14,700.
- Monthly depreciation is $10,000.
- Ignore taxes.
Statement of Financial Position
Cash $ 15,000
Accounts receivable (net of allowance for uncollectible accounts) 85,000
Property, plant and equipment (net of $512,000 accumulated depreciation) 1,012,000
Total assets $1,269,500
Liabilities and Stockholders' Equity:
Accounts payable $ 262,000
Common stock 680,000
Retained earnings 327,500
Total liabilities and stockholders' equity $1,007,500
The cash balance at the end of December would be:
See Excel file attached.
12/31/2008 October November December Totals
Cash balance 15,000 15,000
October sales collections 85,000 ...
The solution provides a detail accounting for how to come to a projected cash balance at the end of December. It is summarized in an Excel spreadsheet.