Quail Industries is preparing its cash budget for the third quarter of the current year. Sales for

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Question:

Quail Industries is preparing its cash budget for the third quarter of the current year. Sales for the third quarter are budgeted at $696,000 ($232,000 per month). Sales are 80% cash, with the remaining 20% on credit which is collected in the month following the month of sale. On June 30, the cash balance is $38,400, and the Accounts Receivable (all related to June sales) balance is $40,800. Operating expenses for the quarter are budgeted at $371,200, which includes $14,400 of depreciation. Cash expenses are paid in the month incurred. Cash purchases for merchandise inventory are budgeted at $313,600 for the quarter. To prepare for the busy fourth quarter, Quail’s desired cash balance on September 30 is $120,000.

How much financing will the company need at the end of the third quarter?

a. $29,600

b. $61,600

c. $116,800

d. $15,200