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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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.

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