ing situation applies to ABC Co. The company’s Financial Department asks Barclays bank a $80,000 loan to be made on April 1 and repaid on June 30 with an annual interest of 12%. The owner plans to increase the store’s inventory by $60,000 in April and needs the loan to pay for inventory acquisitions. The bank’s loan officer needs more information about the company's ability to repay the loan and asks the owner to forecast the store’s June 30 cash positio
The following situation applies to ABC Co. The company’s Financial Department asks Barclays bank a $80,000 loan to be made on April 1 and repaid on June 30 with an annual interest of 12%. The owner plans to increase the store’s inventory by $60,000 in April and needs the loan to pay for inventory acquisitions. The bank’s loan officer needs more information about the company's ability to repay the loan and asks the owner to
The budgeted April merchandise purchases include the inventory increase. All sales are on account. The company predicts that 25% of credit sales is collected in the month of the sale, 45% in the month following the sale, 20% in the second month, 9% in the third, and the remainder is uncollectible. All merchandise is purchased on credit; 80% of the balance is paid in the month following a purchase and the remaining 20% is paid in the second month.
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