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Carver Lumber: cash balance at the end of December would be?

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
October 31
Assets:
Cash $ 15,000
Accounts receivable (net of allowance for uncollectible accounts) 85,000
Inventory 157,500
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:

$461,880

$245,800

$284,800

$285,180

Attachments

Solution Preview

See Excel file attached.

Carver Lumber
Cash Projection
12/31/2008 October November December Totals

Cash balance 15,000 15,000

October sales collections 85,000 ...

Solution Summary

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.

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