Concept explainers
Learning Goal 4
P4-12 Cash budget: Advanced The actual sales and purchases for Xenocore Inc. for September and October 2019, along with its
Wages and salaries amount to 20% of the preceding month’s sales. Rent of $20,000 per month must be paid. Interest payments of $10,000 are due in January and April. A principal payment of $30,000 is also due in April. The firm expects to pay cash dividends of $20,000 in January and April. Taxes of $80,000 are due in April. The firm also intends to make a $25,000 cash purchase of fixed assets in December.
- a. Assuming that the firm has a cash balance of $22,000 at the beginning of November, determine the end-of- month cash balances for each month, November through April.
- b. Assuming that the firm wishes to maintain a $15,000 minimum cash balance, determine the required total financing or excess cash balance for each month, November through April.
- c. If the firm were requesting a line of credit to cover needed financing for the period November to April, how large would this line have to be? Explain your answer.
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