Question

Consider the following third-quarter budget data for TAP & Brothers:

TAP & Brothers Third-Quarter Budget Data

	July	August	September
Credit Sales	254849	266370	281008
Credit Purchases	97712	113113	131293
Wages, Taxes, and Expenses	26632	31305	33401
Interest	7166	7522	7997
Equipment Purchases	54127	61180	0

The company predicts that 4% of its credit sales will never be collected, 30% of its sales will be collected in the month of the sale, and the remaining 66% will be collected in the following month. Credit purchases will be paid in the month following the purchase.

In June, credit sales were $138659, and credit purchases were $102418

July’s beginning cash is $184490

If TAP maintains a policy of always keeping a minimum cash balance of $75,000 as a buffer against uncertainty and forecasting errors, what is the cash surplus/deficit at the end of the quarter (i.e., end of September)? (Answer surplus as a positive number or deficit as a negative number. Round answer to 0 decimal places. Do not round intermediate calculations)

Answer 1

Description	June	July	August	September
Credit Sale	138,659	254,849	266,370	281,008
Credit sale collection- same month-30%	69,330	76,455	79,911	84,302
Credit sale collection- next month-66%		91,515	168,200	175,804
Monthly sale collection	69,330	167,970	248,111	260,107
Raw Material Purchase cost	102,418	97712	113113	131293
Raw material payment- Next month		102,418	97,712	113,113
Wages, Taxes, and Expenses	-	26,632	31,305	33,401
Interest	-	7,166	7,522	7,997
Equipment Purchases		54,127	61,180	-
Total		87,925	100,007	41,398
Opening cash		184,490	162,117	212,509
Budgeted Receipts		167,970	248,111	260,107
Budgeted Cash payments to AP		(102,418)	(97,712)	(113,113)
Budgeted Cash payments to others		(87,925)	(100,007)	(41,398)
Closing cash balance		162,117	212,509	318,105
Closing cash balance at Sep end	318,105
Cash balance required	75,000
Excess cash	243,105