) The Sharpe Corporation’s projected sales for the first eight months of
2004 are as follows:
Of Sharpe’s sales, 10 percent is for cash, another 60 percent is collected in the month
following sale, and 30 percent is collected in the second month following sale. November
and December sales for 2003 were $220,000 and $175,000, respectively.
Sharpe purchases its raw materials two months in advance of its sales equal to 60 percent
of their final sales price. The supplier is paid one month after it makes delivery. For
example, purchases for April sales are made in February and payment is made in March.
In addition, Sharpe pays $10,000 per month for rent and $20,000 each month for other
expenditures. Tax prepayments of $22,500 are made each quarter, beginning in March
The company’s cash balance at December 31, 2003, was $22,000; a minimum balance of