Tortilla Corp. has provided a part of its budget for the second quarter: Apr May JunCash collections $40,000 $40,000 $42,000Cash payments: Purchases of direct materials 7,200 7,000 4,500Operating expenses 7,000 7,000 Capital expenditures 10,000 4,000 20,000The cash balance on April 1 is $14,000. Assume that there will be no financing transactions or costs during the quarter. Calculate the projected cash balance at the end of May: (A) $51,800 (B) $69,800 (C) $54,000 (D) $18,000

The correct option is A

Explanation:

For the month of April

Receipts = Opening + Collection

= $14,000 + $40,000

= $54,000

Payments = Purchases of direct materials + Operating expense + Capital expenditure

= $7,200 + $7,000 + $10,000

= $24,200

Closing Balance = Receipts - Payments

= $54,000 - $24,200

= $29,800

For the month of May

Receipts = Opening + Collection

= $29,800 + $40,000

= $69,800

Payments = Purchases of direct materials + Operating expense + Capital expenditure

= $7,000 + $7,000 + $4,000

= $18,000

Closing Balance = Receipts - Payments

= $69,800 - $18,000

= $51,800

Projected cash balance at the end of May is $51,800