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from management team, she has the following information. October November December Cash receipts $54,000 $ 56,500 $56,000 54,000 Cash Disbursements 52,000 62,000 Addition Information: 1. Line of credit draw: must be taken out on the first of the month in $1,000 increments 2. Line of credit payment: must be repaid on the last day of the month, in $1,000 increments 3. Credit line balance, eptember 30, $2.000

from management team, she has the following information. October November December Cash receipts $54,000 $ 56,500 $56,000 54,000 Cash Disbursements 52,000 62,000 Addition Information: 1. Line of credit draw: must be taken out on the first of the month in $1,000 increments 2. Line of credit payment: must be repaid on the last day of the month, in $1,000 increments 3. Credit line balance, eptember 30, $2.000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Scout is a true accountant: she not only likes knowing where every dollar is going, she is obsessed about it. So, she is happy to take on the cash for this small company. She wants to go back through the fourth-quarter plan with a fine-toothed comb before working on the following calendar year's cash budget. After reviewing many notes from management team, she has the following information. October November December Cash receipts $54,000 $ 56,500 $56,000 Cash Disbursements 52,000 62,000 54,000 Addition Information: |1. Line of credit draw: must be taken out on the first of the month in $1,000 increments 2. Line of credit payment: must be repaid on the last day of the month, in $1,000 increments 3. Credit line balance, September 30, $2,000 4. Annual loan interest rate, 5% with monthly interest payments required 5. Minimum monthly cash account balance, $10,000 6. Cash balance, September 30, $10,500 Required A. Complete the fourth-quarter cash budget for Scout, reporting amounts for each month and for the quarter overall. B. Assume company executive prefer not to borrow more than $5,000 from the company's line of credit at any given time (because debt in any amount makes them nervous). In this fourth quarter , is this an issue? If so, Identify for which month(s) this is an issue. C. Assume all of the company's sales are made on account, and 95% of the customers pay their bill in full (albeit sometimes t3 months later). What tactics could the accounting and finance department use to improve the company's cash flow?ldentify as many feasible as you can.
Transcribed Image Text:Scout is a true accountant: she not only likes knowing where every dollar is going, she is obsessed about it. So, she is happy to take on the cash for this small company. She wants to go back through the fourth-quarter plan with a fine-toothed comb before working on the following calendar year's cash budget. After reviewing many notes from management team, she has the following information. October November December Cash receipts $54,000 $ 56,500 $56,000 Cash Disbursements 52,000 62,000 54,000 Addition Information: |1. Line of credit draw: must be taken out on the first of the month in $1,000 increments 2. Line of credit payment: must be repaid on the last day of the month, in $1,000 increments 3. Credit line balance, September 30, $2,000 4. Annual loan interest rate, 5% with monthly interest payments required 5. Minimum monthly cash account balance, $10,000 6. Cash balance, September 30, $10,500 Required A. Complete the fourth-quarter cash budget for Scout, reporting amounts for each month and for the quarter overall. B. Assume company executive prefer not to borrow more than $5,000 from the company's line of credit at any given time (because debt in any amount makes them nervous). In this fourth quarter , is this an issue? If so, Identify for which month(s) this is an issue. C. Assume all of the company's sales are made on account, and 95% of the customers pay their bill in full (albeit sometimes t3 months later). What tactics could the accounting and finance department use to improve the company's cash flow?ldentify as many feasible as you can.
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