Piano Man, Inc., has a 40-day average collection period and wants to maintain a
ID: 2651544 • Letter: P
Question
Piano Man, Inc., has a 40-day average collection period and wants to maintain a minimum cash balance of $30 million, which is what the company currently has on hand. The company currently has a receivables balance of $194 million and has developed the following sales and cash disbursement budgets in millions:
Complete the following cash budget for the company. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter your answers in millions of dollars. Round your answers to the nearest whole million dollar amount (e.g., 32).)
Piano Man, Inc., has a 40-day average collection period and wants to maintain a minimum cash balance of $30 million, which is what the company currently has on hand. The company currently has a receivables balance of $194 million and has developed the following sales and cash disbursement budgets in millions:
Explanation / Answer
Answer:
PIANO MAN, INC.
Cash Budget
(in millions)
Q1
Q2
Q3
Q4
Beginning receivables (A)
$ 194.00
$ (101.29)
$ 209.78
$ (83.53)
Sales (B)
$ 423.00
$ 495.00
$ 576.00
$ 540.00
Cash collections (A+B-C)
$ 718.29
$ 183.93
$ 869.32
$ 254.58
Ending receivables (C)
$ (101.29)
$ 209.78
$ (83.53)
$ 201.89
[(ACP /365)* Sales Revenue]*2-Beginning Rec.
=(((40 /365)* 423)*2)-194
=(((40 /365)* 495)*2)-(-101.29)
=(((40 /365)* 576)*2)-209.78
=(((40 /365)* 540)*2)-(-83.53)
Total cash collections
$ 718.29
$ 183.93
$ 869.32
$ 254.58
Total cash disbursements
$ 322.00
$ 440.00
$ 686.00
$ 445.00
Net cash inflow
$ 396.29
$ (256.07)
$ 183.32
$ (190.42)
Beginning cash balance
$ -
$ 396.29
$ 140.22
$ 323.53
Net cash inflow
$ 396.29
$ (256.07)
$ 183.32
$ (190.42)
Ending cash balance
$ 396.29
$ 140.22
$ 323.53
$ 133.11
Minimum cash balance
$ 30.00
$ 30.00
$ 30.00
$ 30.00
Cumulative surplus (deficit)
$ 366.29
$ 110.22
$ 293.53
$ 103.11
PIANO MAN, INC.
Cash Budget
(in millions)
Q1
Q2
Q3
Q4
Beginning receivables (A)
$ 194.00
$ (101.29)
$ 209.78
$ (83.53)
Sales (B)
$ 423.00
$ 495.00
$ 576.00
$ 540.00
Cash collections (A+B-C)
$ 718.29
$ 183.93
$ 869.32
$ 254.58
Ending receivables (C)
$ (101.29)
$ 209.78
$ (83.53)
$ 201.89
[(ACP /365)* Sales Revenue]*2-Beginning Rec.
=(((40 /365)* 423)*2)-194
=(((40 /365)* 495)*2)-(-101.29)
=(((40 /365)* 576)*2)-209.78
=(((40 /365)* 540)*2)-(-83.53)
Total cash collections
$ 718.29
$ 183.93
$ 869.32
$ 254.58
Total cash disbursements
$ 322.00
$ 440.00
$ 686.00
$ 445.00
Net cash inflow
$ 396.29
$ (256.07)
$ 183.32
$ (190.42)
Beginning cash balance
$ -
$ 396.29
$ 140.22
$ 323.53
Net cash inflow
$ 396.29
$ (256.07)
$ 183.32
$ (190.42)
Ending cash balance
$ 396.29
$ 140.22
$ 323.53
$ 133.11
Minimum cash balance
$ 30.00
$ 30.00
$ 30.00
$ 30.00
Cumulative surplus (deficit)
$ 366.29
$ 110.22
$ 293.53
$ 103.11