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

Answer:

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

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