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.
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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