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    Compute a budgeted cash balance

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    Sherman Company has a cash balance on January 1 of $123,219. Given the following data, compute Sherman's budgeted cash balance on March 31. Round all amounts to the nearest dollar.

    Past and budgeted future activity, in $000:

    Sales Operating expense

    November 1,625 525
    December 1,790 460
    January 1,428 448
    February 1,295 395
    March 1,306 421
    April 1,422 404

    Sherman has a gross profit of 40%, and has a policy of maintaining an inventory of 150% of expected next-month sales. Operating expenses are paid 75% in the current month, and 25% in the following month. Purchases of merchandise are paid for 50% in the current month, and 50% in the following month. All sales are on credit. Normal pattern of collections is: 40% in month of sale, 44% in following month, 11% in next following month, 5% uncollectible.

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    Solution Preview

    Please see the attached Excel 97-2003 spreadsheet for format and formulas.

    Sherman Company has a cash balance on January 1 of $123,219.Ã? Ã? Given the following data, compute Sherman's budgeted cash balance on March 31.Ã? Ã? Round all amounts to the nearest dollar.

    Past and budgeted future activity, in $000:
    Operating
    Sales expense
    November $1,625 $525
    December $1,790 $460
    January $1,428 $448
    February $1,295 $395
    March $1,306 $421
    April $1,422 $404

    Sherman has a gross profit of 40%, and has a policy of maintaining an inventory of 150% of expected next-month sales.Ã? Ã? Operating expenses are paid 75% in the
    current month, and 25% in the following month.Ã? Ã? Purchases of merchandise are paid for 50% in the ...

    Solution Summary

    This solution illustrates how to compute a budgeted cash balance.

    $2.19