Suits Inc. expect to sell 8,500 units for $190 each in January, 2,500 suits for $200 each in February and 4,700 suits in March for $210 each. Sales revenue is collected 75% in the month of sales, and 20% the next month. (5% of sales are never collected.) Jan. 1 accounts receivable are $290,000. It is expected that 80% of the Jan. 1 receivable swill be collected, and the rest will never be collected. Cost of Goods sold is 70% of sales revenue. Cost of goods sold is paid 60% in the month of sale and 40% in the next month. There are accounts payable of $240,000 on Jan. 1. Our cash balance on Jan. 1 is $60,000. We want to keep a minimum cash balance of $50,000 at the end of each month. We can borrow at the beginning of any month in increments of $10,000. The interest rate is 12% annually, i.e. 1% a month. Interest is paid monthly at the end of the month. Prepare a monthly schedule of cash receipts, cash disbursements and borrowing and interest payments (if required) for January and February. This is a problem I have to solve and I am unsure how to do it, can you provide me with a step by step process to solving this and writing up the schedule of cash receipts, cash disbursements and borrowing and interest payments for January and February?
Suits Inc. expect to sell 8,500 units for $190 each in January, 2,500 suits for $200 each in February and 4,700 suits in March for $210 each. Sales revenue is collected 75% in the month of sales, and 20% the next month. (5% of sales are never collected.) Jan. 1
Our cash balance on Jan. 1 is $60,000. We want to keep a minimum cash balance of $50,000 at the end of each month. We can borrow at the beginning of any month in increments of $10,000. The interest rate is 12% annually, i.e. 1% a month. Interest is paid monthly at the end of the month.
Prepare a monthly schedule of cash receipts, cash disbursements and borrowing and interest payments (if required) for January and February.
This is a problem I have to solve and I am unsure how to do it, can you provide me with a step by step process to solving this and writing up the schedule of cash receipts, cash disbursements and borrowing and interest payments for January and February?
Step by step
Solved in 2 steps
