I-21.01 Problem

I-21.01 Problem - I-21.01 Jeff Miller owns Miller Auto Body...

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I-21.01 Jeff Miller owns Miller Auto Body Repair. During some months, he seems to have sufficient cash to meet all needs, and maintain a comfortable cash reserve balance. During other months, he is frustrated because his operating cash supply is severely depleted. As a result, he is establishing a borrowing agreement with a local bank. His objective is to borrow (on the first day of the month) or repay (on the last day of the month) on the loan each month, in $2,500 increments. His planned borrowings/repayments will be based upon a cash budget, and tied to the assumption that the company will end each month with no less than $10,000 of available cash. Evaluate the following facts relating to the period July 1 to September 30, and prepare a monthly cash budget. Whenever repayments are made on the loan, the repayment is to include all accrued interest from the time of the loan origination. Interest accrues at 1% per month. Miller Auto Body had $12,500 of cash on hand on July 1. Sales for May and June were $250,000 and $300,000, respectively.
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This note was uploaded on 02/29/2012 for the course ACCOUNTING 101 taught by Professor Hudack during the Spring '11 term at FIU.

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