Question

Blueline Printing's board of directors was presented with the following information about operations for an upcoming three-month period. The board desires to declare a dividend at the end of June, but still maintain cash on hand of $350,000. Blueline began April with $78,000 of cash on hand. Prepare a cash budget, and determine how much cash will be available for the dividend.

April May June

	April	May	June
Customer receipts	$750,000	$780,000	$820,000
Cash paid for direct materials	220,000	225,000	270,000
Cash paid for direct labor	250,000	270,000	350,000
Factory overhead*	150,000	150,000	158,000
SG&A**	88,000	90,000	85,000
Taxes	17,000	19,000	17,000
Equipment purchase***			500,000
* Includes monthly depreciation of $100,000
** Includes monthly depreciation of $25,000
*** Equipment purchase to be paid for in July

	A.	Available for dividend $84,000
	B.	Available for dividend $94,000
	C.	Available for dividend $96,000
	D.	Available for dividend $97,000
	E.	Available for dividend $98,000
	F.	None of the above

Answer 1

CALCULATION OF CASH AVAILABLE FOR DIVIDEND PAYMENT
	APRIL	MAY	JUNE	TOTAL
Customer Receipts	$     7,50,000	$    7,80,000	$       8,20,000	$       23,50,000
Less: Cash Payments
Cash paid to Direct Materials	$     2,20,000	$    2,25,000	$       2,70,000	$          7,15,000
Cash paid to direct labor	$     2,50,000	$    2,70,000	$       3,50,000	$          8,70,000
Cash paid for Factory overhead ( Reduced by Dep of $ 100,000)	$         50,000	$        50,000	$           58,000	$          1,58,000
SG & A (Reduced by Depreciation of $ 25,000)	$         63,000	$        65,000	$           60,000	$          1,88,000
Taxes paid in cash	$         17,000	$        19,000	$           17,000	$             53,000
Total Cash Paid	$     6,00,000	$    6,29,000	$       7,55,000	$       19,84,000
Excess balance of Cash				$          3,66,000
Add: Opening balance of cash				$             78,000
Less: Cash to be maintained in hand				$          3,50,000
Net Balance avaialble for Dividend				$             94,000
Answer = Option B = Available for Dividend = $ 94,000