ACCT 505 Week 6 Quiz Segment Reporting and Relevant Costs for Decisions
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Inventory balance as of September 30 $ 112,000 Merchandise purchases for September $ 200,000 The company maintains a minimum cash balance of at least $ 50,000 at the end of each month. All borrowing is done at the beginning of a month; any repayments are made at the end of a month. The company has an agreement with a bank that allows the company to borrow the exact amount needed at the beginning of each month. The interest rate on these loans is 1 % per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company will pay the bank all of the accrued interest on the loan and as much of the loan as possible while still retaining at least $ 50,000 in cash. Required: Prepare a cash budget for the three-month period ending December 31. Include the following detailed budgets: 1. a. A sales budget, by month and in total. b. A schedule of expected cash collections from sales, by month and in total. c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. 2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $ 50,000. ================================================
ACCT 505 Week 6 Quiz Segment Reporting and Relevant Costs for Decisions
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