The Cash Available component on a Cash Budget consists of which of the following
ID: 2513143 • Letter: T
Question
The Cash Available component on a Cash Budget consists of which of the following? a. Beginning Balance plus Sale of Securities plus Capital Expenditures. b. Beginning Balance plus Cash Collections plus Sale of Plant Assets c. Beginning Balance plus Capital Expenditures plus Loans Payable. 3. d. Both b and c answers are correct. e. None of the above answers is correct. 4. Gary Enterprises has budgeted sales for the months of September and Octo as É 200 000 and $280,000 respectively. Monthly Sales are 80% credit andExplanation / Answer
The correct answer is option b. i.e. Beginning Balance plus Cash Collections plus Sale of Plant Assets.
Let us analyse each component one by one.
a. Beginning Balance and Slae of Secutrities will add to cash available but capital expenditure will lead to cash outflows. Thus it will lead to reduction of available cash and hence cannot be added to cash available but will be reduced from the same. Therefore option a is not correct.
b. Beginning balance, cash collections and sale of plant assets will all lead to addition of cash balance and therefore will form part of Cash Available component
c. Beginnin Balance and Loans will add to cash balance but capital expenditure will lead to cash outflows as explained in point a. Therefore option c is also not correct.