Hilliard company budgeted the following transactions for april 2014: picture the beginning cash balance was $50,000. the company desires to have a $25,000 ending cash balance. what is the amount of the cash surplus or shortage?

a.$40,000 surplus
b. $40,000 shortage
c. $20,000 shortage
d. there is no surplus or shortage.

The correct option is C

Explanation:

Computing budgeted cash flow as:

Total cash available during the month = Opening cash balance + Cash income from revenue

= $50,000 + (75% of sales)

= $50,000 + (75% × $200,000)

= $50,000 + $150,000

= $200,000

Balance available = Total cash available during the month  - Budgeted expense

= Total cash available during the month - ( Operating expense + Payment of debts + Purchase of investment)

= $200,000 - ($105,000 + $15,000 + $75,000)

= $200,000 - $195,000

= $5,000

Cash shortfall or shortage = Desired balance - Available balance

= $25,000 - $5,000

= $20,000 shortage

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