Explore BrainMass

Ending cash balance for Tiffany Company

Use the information below to answer the following question(s).

The following information pertains to Tiffany Company:
Month Sales Purchases
January $30,000 $16,000
February $40,000 $20,000
March $50,000 $28,000

Cash is collected from customers in the following manner:
Month of sale 30%
Month following the sale 70%

40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.
Labor costs are 20% of sales. Other operating costs are $15,000 per month (including $4,000 of depreciation). Both of these are paid in the month incurred.

The cash balance on March 1 is $4,000. A minimum cash balance of $3,000 is required at the end of the month. Money can be borrowed in multiples of $1,000.

What is the ending cash balance for March?

a. a. $3,000
b. b. $3,800
c. c. $28,000
d. d. $3,200

Solution Preview

=Opening Balance+Cash collections-Closing cash

= 4000+ (40000*.7+50000*.3)- (20000*.6+28000*.4+.2*50000+11000)
=$2800 +1000 ...

Solution Summary

This provides the steps to calculate the ending cash balance