Budgeting Quiz Yourself #1

Suppose Charlie is a bit worried about the cash balance. He would like to have at least $700 in the bank at the end of the year. He can spend less, but he could also try to speed up cash collections. The original split between cash sales and sales on account was 50/50. To what proportion of total sales would the cash sales have to rise in order to ensure a $700 ending cash balance? How would you figure this out?

Answer to "how you would figure this out."

The easiest way to figure this out is with a bit of trial and error in the cells where we represented the original proportions. With a cash/sales on account split of 80%/20%, the ending cash balance is $704. A split of 79%/21% doesn't quite do it, leaving a cash balance of $698.

For a look at the respective spreadsheets that show the result, click the hyperlinks below.

Revised accounts receivable schedule.

Note the highlighted cells.

Revised balance sheet

Copyright © 2004 Gerald M. Myers. All rights reserved. This site has been developed as aid to instructors and students in managerial accounting. The scenarios contained herein are not intended to reflect effective or ineffective handling of managerial situations. Any resemblance to existing organizations is purely coincidental.

Last modified: August 03, 2005