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80% of accounts payable are paid in the month following when the
cost is incurred.
20% of accounts payable are paid in the 2nd month following when
the cost is incurred.
Wages are 28% of sales and are paid currently
Annual general and administrative costs are $1,411,200 and are
incurred evenly throughout the year.
Annual property taxes are $14,000 and are paid semi annually in
June and October.
A $10,000 cash capital purchase will be made in April.
The beginning cash balance in April is expected to be $47,000. The
Hale Company has a policy of maintaining a minimum cash
balance of $45,000. The company has an arrangement with a local
bank for a line of credit that carries a 10% annual interest rate. If
the ending monthly balance falls below $45,000, the company will
borrow against the line of credit so that the minimum balance can
be maintained. If the company has borrowed against the line of
credit and a cash balance is expected to be above $45,000 at the end
of a particular month, then repayments will be made bringing the
cash balance down to $45,000. Interest on the line of credit is paid
monthly. Assume that all line of credit transactions occur on the last
day of the month.
Required:
Prepare a cash budget for the Hale Company for the 2nd quarter of
the year. Include April, May, June, and a quarter total in your
budget.
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ACCT 556 Week 6 Homework Problem
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