2A bank offers your firm a revolving creditarrangement for up to $64 million at aninterest rate of 1.60% per quarter. The bankalso requires you to maintain a compensatingbalance of 3% against the unused portion ofthe credit line, to be deposited in a non-interest-bearing account. Assume you have ashort-term investment account at the bankSkippedthat pays .95% per quarter, and assume thatthe bank uses compound interest on itsrevolving credit loans. (Do not roundintermediate calculations. Round the finalanswers to 2 decimal places.)a. What is your effective annual interest rate(an opportunity cost) on the revolving creditarrangement if your firm does not use itduring the year?Effective annual interest rate%b. What is your effective annual interest rateon the lending arrangement if you borrow $32million immediately and repay it in one year?Effective annual interest ratec. What is your effective annual interest rate ifyou borrow $64 million immediately andrepay it in one year?Effective annual interest rate% 1The following is the sales budget forYellowhead Inc. for the first quarter of 2018:MarchJanuary$216,000February$236,000Sales$259,000SkippedCredit sales are collected as follows: 65% inthe month of the sale, 30% in the month afterthe sale, and 5% in the second month afterthe sale.The accounts receivable balance at the end ofthe previous quarter was $100,000 ($70,000of which was uncollected December sales).a. Calculate the sales for November. (Omit $sign in your response.)November salesb. Calculate the sales for December. (Roundthe final answer to 2 decimal places. Omit $sign in your response.)December salesc. Calculate the cash collections from sales foreach month from January through March. (Donot round intermediate calculations. Roundthe final answers to 2 decimal places. Omit$ sign in your response.)

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The following is the sales budget for Yellowhead Inc. for the first quarter of 2018: March January $216,000 February $236,000 Sales $259,000 Credit sales are collected as follows: 65% in the month of the sale, 30% in the month after the sale, and 5% in the second month after the sale. The accounts receivable balance at the end of the previous quarter was $100,000 ($70,000 of which was uncollected December sales). a. Calculate the sales for November. (Omit $ sign in your response.) November sales $ b. Calculate the sales for December. (Round the final answer to 2 decimal places. Omit $ sign in your response.) December sales c. Calculate the cash collections from sales for each month from January through March. (Do not round intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.)

The following is the sales budget for Yellowhead Inc. for the first quarter of 2018: March January $216,000 February $236,000 Sales $259,000 Credit sales are collected as follows: 65% in the month of the sale, 30% in the month after the sale, and 5% in the second month after the sale. The accounts receivable balance at the end of the previous quarter was $100,000 ($70,000 of which was uncollected December sales). a. Calculate the sales for November. (Omit $ sign in your response.) November sales $ b. Calculate the sales for December. (Round the final answer to 2 decimal places. Omit $ sign in your response.) December sales c. Calculate the cash collections from sales for each month from January through March. (Do not round intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 4P

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Cash budget The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent 50,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in January, and the annual property taxes are paid in December. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of September 1 include cash of 40,000, marketable securities of 75,000, and accounts receivable of 300,000 (60,000 from July sales and 240,000 from August sales). Sales on account for July and August were 200,000 and 240,000, respectively. Current liabilities as of September 1 include 40,000 of accounts payable incurred in August for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of 55,000 will be made in October. Bridgeports regular quarterly dividend of 25,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of 50,000. Instructions Prepare a monthly cash budget and supporting schedules for September, October, and November. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
Cash budget The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in the month following the sale and the remainder the following month (second month after sale). Depreciation, insurance, and property tax expense represent 12,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in February, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of June 1 include cash of 42,000, marketable securities of 25,000, and accounts receivable of 198,000 (150,000 from May sales and 48,000 from April sales). Sales on account in April and May were 120,000 and 150,000, respectively. Current liabilities as of June 1 include 13,000 of accounts payable incurred in May for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of 24,000 will be made in July. Mercury Shoes regular quarterly dividend of 15,000 is expected to be declared in July and paid in August. Management desires to maintain a minimum cash balance of 40,000. Instructions Prepare a monthly cash budget and supporting schedules for June, July, and August. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
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