Problem 1. Jane McDonald, a financial analyst for Carroll Company, has prepared the following sales and cash disbursement estimates for the period February to June of the current year. Month Sales Cash disbursements February $500 $400 March 600 300 April 400 600 May 200 500 June 200 200 McDonald notes that historically, 30% of sales have been for cash. Of credit sales, 70% are collected 1 month after the sale, and the remaining 30% are collected 2 months after the sale. The firm wishes to maintain a minimum ending balance in its cash account of $25. Balances above this amount would be invested in short-term government securities (marketable securities), whereas any deficits would be financed through short-term bank borrowing (notes payable). The beginning cash balance at April 1 is $115. a. Prepare cash budgets for April, May, and June. b. How much financing, if any, at a maximum would Carroll Company require to meet its obligations during this 3-month period? c. A pro forma balance sheet dated at the end of June is to be prepared from the information presented. Give the size of each of the following: cash, notes payable, marketable securities, and accounts receivable.
Problem 1. Jane McDonald, a financial analyst for Carroll Company, has prepared the following sales and cash disbursement estimates for the period February to June of the current year. Month Sales Cash disbursements February $500 $400 March 600 300 April 400 600 May 200 500 June 200 200 McDonald notes that historically, 30% of sales have been for cash. Of credit sales, 70% are collected 1 month after the sale, and the remaining 30% are collected 2 months after the sale. The firm wishes to maintain a minimum ending balance in its cash account of $25. Balances above this amount would be invested in short-term government securities (marketable securities), whereas any deficits would be financed through short-term bank borrowing (notes payable). The beginning cash balance at April 1 is $115. a. Prepare cash budgets for April, May, and June. b. How much financing, if any, at a maximum would Carroll Company require to meet its obligations during this 3-month period? c. A pro forma balance sheet dated at the end of June is to be prepared from the information presented. Give the size of each of the following: cash, notes payable, marketable securities, and accounts receivable.
Chapter7: Budgeting
Section: Chapter Questions
Problem 9EB: Cash collections for Renew Lights found that 65% of sales were collected in the month of sale, 25%...
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Question
![Problem 1. Jane McDonald, a financial analyst for Carroll Company, has prepared the following sales and cash
disbursement estimates for the period February to June of the current year.
Cash
disbursements
Month
Sales
February
$500
$400
March
600
300
April
400
600
May
200
500
June
200
200
McDonald notes that historically, 30% of sales have been for cash. Of credit sales, 70% are collected 1 month after the
sale, and the remaining 30% are collected 2 months after the sale. The firm wishes to maintain a minimum ending
balance in its cash account of $25. Balances above this amount would be invested in short-term government securities
(marketable securities), whereas any deficits would be financed through short-term bank borrowing (notes payable).
The beginning cash balance at April 1 is $115.
a. Prepare cash budgets for April, May, and June.
b.
How much financing, if any, at a maximum would Carroll Company require to meet its obligations during this
3-month period?
c. A pro forma balance sheet dated at the end of June is to be prepared from the information presented. Give
the size of each of the following: cash, notes payable, marketable securities, and accounts receivable.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffded5319-edc0-4993-93b1-267c8dcc231b%2Fa2fe9bad-d634-49c2-b1c7-e22efc8278d1%2Fkld92n3_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 1. Jane McDonald, a financial analyst for Carroll Company, has prepared the following sales and cash
disbursement estimates for the period February to June of the current year.
Cash
disbursements
Month
Sales
February
$500
$400
March
600
300
April
400
600
May
200
500
June
200
200
McDonald notes that historically, 30% of sales have been for cash. Of credit sales, 70% are collected 1 month after the
sale, and the remaining 30% are collected 2 months after the sale. The firm wishes to maintain a minimum ending
balance in its cash account of $25. Balances above this amount would be invested in short-term government securities
(marketable securities), whereas any deficits would be financed through short-term bank borrowing (notes payable).
The beginning cash balance at April 1 is $115.
a. Prepare cash budgets for April, May, and June.
b.
How much financing, if any, at a maximum would Carroll Company require to meet its obligations during this
3-month period?
c. A pro forma balance sheet dated at the end of June is to be prepared from the information presented. Give
the size of each of the following: cash, notes payable, marketable securities, and accounts receivable.
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