Mary and Kay Inc maintains a 75000 minimum cash balance at all times Financing

# Mary and kay inc maintains a 75000 minimum cash

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Mary and Kay, Inc. maintains a \$75,000 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 \$600,000 \$690,000 \$705,000 Merchandise purchases 420,000 450,000 570,000 Cash operating costs 108,000 87,000 150,000 Proceeds from sale of equipment 30,000 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.
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 \$48,000 Collection of January sales 360,000 180,000 Collection of February sales 414,000 207,000 Collection of March sales 423,000 Sale of equipment 30,000 Total cash collections \$408,000 \$594,000 \$660,000 Explanation 1. Schedule of cash collections: Collection of accounts receivable: \$240,000 × 20% = \$48,000 Collection of January sales (\$600,000): 60% in January; 30% in February = \$360,000; \$180,000 Collection of February sales (\$690,000): 60% in February; 30% in March = \$414,000; \$207,000 Collection of March sales (\$705,000): 60% in March; 30% in April = \$423,000

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• Spring '14
• Zeeshan

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