The Hale Company is currently working on its cash budget for the coming year . The following information is available : Projected sales for the coming year :
The collection history of the Hale Company has been as follows : 20 % of sales are collected in the month of the sale . 60 % of the sales are collected in the month following the sale . 12 % of the sales are collected in the 2nd month following the sale . 5 % of the sales are collected in the 3rd month following the sale .
The following information regarding costs is available : The cost of goods sold is 54 % of sales
Items for sale are purchased in the month of the sale . 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 .