The beginning cash balance for April, is the cash from March 31 in the Asset section of the balance sheet. In the merchandise purchases budget, in April, we need 50% of March purchases (that amount is also given to us 3/31 Accounts payable of $100,000 on page 415). Therefore, Total cash disbursements for April is (50% x $316,000 April purchases) + ($100,000 remaining March purchases to be paid) = $258,000.
Class, Here are some hints. Lets start from the beginning:
First, take budgeted sales in units for each month of April, May, and June, and multiply by the selling price of $10/unit. You will get TOTAL SALES which you will also need to plug into the Income Statement later. For example, April should be 65,000 units times $10 = $650,000 Total Sales.
For your Schedule of Expected Cash Collections, each months units must be multiplied by the $10 selling price to yield the months sales. Per page 414, we know 10% of a given months sales is collected in the 2nd month following the sale, 70% in the month following the sale, and 20% in the month of sale.
Therefore, for example Total Cash Collection for April will consist of the last 10% of February sales and 70% of March sales and 20% of April sales: (26,000 Feb units x $10 x 0.10) +(40,000 March units x $10 x 0.70) + (65,000 April units x $10 x 0.20) = $436,000. You have to repeat the same process for May and June that I just did for April, and then add up all three months to get the quarter.
Next, we have the Merchandise Purchases Budget. Total Needs are Budgeted sales in units plus Budgeted ending inventory (budgeted ending inventory =40% of the next months sales in units according to the terms of the problem). Once we have Total Needs, we subtract the Beginning Inventory (which of course is the previous months ending inventory) to get Required Unit Purchases. So for April, that is 65,000 April budgeted units + (0.40 x 100,000 May budgeted units) = 105,000