View the step-by-step solution to:

# Problem: 4-6A (Cash budget) The Sharpe Corporation's projected sales for the first eight months of 2004 are as follows:

Problem: 4-6A
(Cash budget) The Sharpe Corporation's projected sales for the first eight months of 2004 are as follows:
January \$ 90,000
February 120,000
March 135,000
April 240,000
May \$300,000
June 270,000
July 225,000
August 150,000
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 \$15,000 must be maintained at all times. Assume that any short-term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds are available. Interest on short-term loans (12 percent) is paid monthly. Borrowing to meet estimated monthly cash needs takes place at the beginning of the month. Thus, if in the month of April the firm expects to have a need for an additional \$60,500, these funds would be borrowed at the beginning of April with interest of \$605 (.12 × 1/12 × \$60,500) owed for April and paid at the beginning of May.
1. Prepare a cash budget for Sharpe covering the first seven months of 2004.
2. Sharpe has \$200,000 in notes payable due in July that must be repaid or renegotiated for an extension. Will the firm have ample cash to repay the notes?
Problems:
5-1A
(Compound interest) To what amount will the following investments accumulate?
1. \$5,000 invested for 10 years at 10 percent compounded annually
2. \$8,000 invested for 7 years at 8 percent compounded annually
3. \$775 invested for 12 years at 12 percent compounded annually
4. \$21,000 invested for 5 years at 5 percent compounded annually
5-4A
(Present value) What is the present value of the following future amounts?
1. \$800 to be received 10 years from now discounted back to the present at 10 percent
2. \$300 to be received 5 years from now discounted back to the present at 5 percent
3. \$1,000 to be received 8 years from now discounted back to the present at 3 percent
4. \$1,000 to be received 8 years from now discounted back to the present at 20 percent
5-5A
(Compound annuity) What is the accumulated sum of each of the following streams of payments?
1. \$500 a year for 10 years compounded annually at 5 percent
2. \$100 a year for 5 years compounded annually at 10 percent
3. \$35 a year for 7 years compounded annually at 7 percent
4. \$25 a year for 3 years compounded annually at 2 percent
5-6A
(Present value of an annuity) What is the present value of the following annuities?
1. \$2,500 a year for 10 years discounted back to the present at 7 percent
2. \$70 a year for 3 years discounted back to the present at 3 percent
3. \$280 a year for 7 years discounted back to the present at 6 percent
4. \$500 a year for 10 years discounted back to the present at 10 percent

Problem: 4-6A
(Cash budget) The Sharpe Corporationâs projected sales for the first
eight months of 2004 are as follows:
January \$ 90,000
February 120,000
March 135,000
April 240,000
May \$300,000
June 270,000
July 225,000
August 150,000
Of Sharpeâ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
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 companyâs cash balance at December 31, 2003, was \$22,000; a
minimum balance of \$15,000 must be maintained at all times. Assume that
any short-term financing needed to maintain the cash balance is paid off
in the month following the month of financing if sufficient funds are
available. Interest on short-term loans (12 percent) is paid monthly.
Borrowing to meet estimated monthly cash needs takes place at the
beginning of the month. Thus, if in the month of April the firm expects
to have a need for an additional \$60,500, these funds would be borrowed
at the beginning of April with interest of \$605 (.12 Ð§ 1/12 Ð§ \$60,500)
owed for April and paid at the beginning of May.
Prepare a cash budget for Sharpe covering the first seven months of
2004.
Sharpe has \$200,000 in notes payable due in July that must be repaid or
renegotiated for an extension. Will the firm have ample cash to repay
the notes?
Â
Problems:
5-1A
(Compound interest) To what amount will the following investments
accumulate?
\$5,000 invested for 10 years at 10 percent compounded annually
\$8,000 invested for 7 years at 8 percent compounded annually
\$775 invested for 12 years at 12 percent compounded annually
\$21,000 invested for 5 years at 5 percent compounded annually
5-4A
(Present value) What is the present value of the following future
amounts?
\$800 to be received 10 years from now discounted back to the present at
10 percent
\$300 to be received 5 years from now discounted back to the present at 5
percent
\$1,000 to be received 8 years from now discounted back to the present at
3 percent
\$1,000 to be received 8 years from now discounted back to the present at
20 percent
5-5A
(Compound annuity) What is the accumulated sum of each of the following
streams of payments?
\$500 a year for 10 years compounded annually at 5 percent
\$100 a year for 5 years compounded annually at 10 percent
\$35 a year for 7 years compounded annually at 7 percent
\$25 a year for 3 years compounded annually at 2 percent
5-6A
(Present value of an annuity) What is the present value of the following
annuities?
\$2,500 a year for 10 years discounted back to the present at 7 percent
\$70 a year for 3 years discounted back to the present at 3 percent
\$280 a year for 7 years discounted back to the present at 6 percent
\$500 a year for 10 years discounted back to the present at 10 percent

### Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

### -

Educational Resources
• ### -

Study Documents

Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

Browse Documents