Question

question 36

Hutchinson, Inc. provides the following data taken from its third quarter budget: Jul Aug Sep Cash collections $66,000 $42,000 $42,000 Cash payments: Purchases of direct materials 32,000 34,000 25,000 Operating expenses 11,000 20,000 22,000 Capital expenditures 0 34,000 6,000 The cash balance on June 30 is projected to be $13,000. Based on the above data, calculate the shortfall the company is projected to have at the end of August. O A. $34.000 OB. $21,000 OC. $36,000 OD. $10,000

Answer 1

	Jul	Aug	Sep
Opening balance of cash	$ 13,000	$ 36,000	($ 10,000)
Cash collection	$ 66,000	$ 42,000	$ 42,000
A. Total Cash available	$ 79,000	$ 78,000	$ 32,000
Cash payments:
Purchase of Direct materials	$ 32,000	$ 34,000	$ 25,000
Operating expenses	$ 11,000	$ 20,000	$ 22,000
Capital Expenditure	0	$ 34,000	$ 6,000
B. Total Cash payment	$ 43,000	$ 88,000	$ 53,000
Closing balance [A-B]	$ 36,000	($ 10,000)	($ 21,000)
Hence the shortfall at the end of August is $ 10,000 i.e. Option D