fm22 10 - 6,000 6,000 6,000 Cumulative surplus cash or...

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Answers and Solutions: 22 - 10 22-14 a. I. Collections and Purchases: December January February Sales $160,000 $40,000 $60,000 Purchases 40,000 40,000 40,000 Payments 140,000* 40,000 40,000 *November purchases = $140,000. II. Gain or Loss for Month: Receipts from sales $160,000 $40,000 $60,000 Payments for: Purchases 140,000 40,000 40,000 Salaries 4,800 4,800 4,800 Rent 2,000 2,000 2,000 Taxes 12,000 --- --- Total payments $158,800 $46,800 $46,800 Net cash gain (loss) $ 1,200 ($ 6,800) $13,200 III. Cash Surplus or Loan Requirements: Cash at start of month 400 1,600 (5,200 ) Cumulative cash $ 1,600 ($ 5,200) $ 8,000 Target cash balance
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Unformatted text preview: 6,000 6,000 6,000 Cumulative surplus cash or total loans to maintain $6,000 target cash balance ($ 4,400 ) ($11,200 ) $ 2,000 b. If the company began selling on credit on December 1, then it would have zero receipts during December, down from $160,000. Thus, it would have to borrow an additional $160,000, so its loans outstanding by December 31 would be $164,400. The loan requirements would build gradually during the month. We could trace the effects of the changed credit policy on out into January and February, but here it would probably be best to simply construct a new cash budget....
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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