Mary and Kay Inc maintains a 80000 minimum cash balance at all times Financing

Mary and kay inc maintains a 80000 minimum cash

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Mary and Kay, Inc. maintains a $80,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 9 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time. Additional data: January February March Sales revenue $640,000 $730,000 $745,000 Merchandise purchases 460,000 490,000 610,000 Cash operating costs 112,000 91,000 154,000 Proceeds from sale of equipment 34,000 Required: 1. Prepare a schedule that discloses the firm’s total cash collections for January through March. 2. Prepare a schedule that discloses the firm’s total cash disbursements for January through March.
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3. Prepare a schedule that summarizes the firm’s financing cash flows for January through March. Prepare a schedule that discloses the firm’s total cash collections for January through March. January February March Collection of accounts receivable $52,000 Collection of January sales 384,000 224,000 Collection of February sales 438,000 255,500 Collection of March sales 447,000 Sale of equipment 34,000 Total cash collections $436,000 $662,000 $736,500 Explanation 1. Schedule of cash collections: Collection of accounts receivable: $260,000 × 20% = $52,000 Collection of January sales ($640,000): 60% in January; 35% in February = $384,000; $224,000 Collection of February sales ($730,000): 60% in February; 35% in March = $438,000; $255,500 Collection of March sales ($745,000): 60% in March; 35% in April = $447,000
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  • Spring '14
  • Zeeshan

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