Bill Joyce, CEO of Joyce and Associates, expects the firm to have $6,000 cash on hand at
Question:
Bill Joyce, CEO of Joyce and Associates, expects the firm to have $6,000 cash on hand at the end of 2009. He estimates the total revenues in 2010 to be $250,000, of which $175,000 will be collected during the year. Payroll and fringe benefits constitute the bulk of the firm's expenditures and will amount to $160,000 in 2010. Other operating expenses, including $5,000 for depreciation and $3,000 for property taxes, are $18,000. The property tax expense is an increase of $500 from the current year. In addition, Bill Joyce plans to update the office equipment for $24,000 in 2010. He expects the payment in 2010 for the office equipment will be $6,000. The county in which the firm is located requires payment of at least one-half of property taxes before the end of the year and the remainder before June 30 of the following year. The desired ending cash balance is $6,000.
Required
Can Bill meet the minimum cash balance? Show calculations.
Expected opening cash balance, 2010 | $6,000 | ||||||
Estimated revenues, 2010 | $250,000 | ||||||
Collections of revenues, 2010 | $175,000 | ||||||
Payroll & Fringe Benefits, 2010 | $160,000 | ||||||
Other operating expenses, 2010: | |||||||
Depreciation expense | $5,000 | ||||||
Property taxes | $3,000 | ||||||
Other (misc.) | $10,000 | ||||||
Projected 2010 increase in property taxes | $500 | ||||||
Purchase of office equipment (fixed assets) | $24,000 | ||||||
Payment in 2010 for office equipment puchase | $6,000 | ||||||
Property tax payment %, prior to end of year | 50% | ||||||
Minimum cash balance required | $6,000 |
Step by Step Answer:
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins