Franklin Co., a specialty retailer, has a history of paying quarterly dividends of $0.50 per share. Management is trying to determine whether the company will have adequate cash on December 31, 2011, to pay a dividend if one is declared by the board of directors. The following additional information is available:
All sales are on account, and accounts receivable are collected one month after the sale. Sales volume has been increasing 5% each month.
All purchases of merchandise are on account, and accounts payable are paid one month after the purchase. Cost of sales is 40% of the sales price. Inventory levels are maintained at $75,000.
Operating expenses in addition to the mortgage are paid in cash. They amount to $3,000 per month and are paid as they are incurred.

Required
Determine the cash that Franklin will have available to pay a dividend on December 31, 2011. Round all amounts to the nearest dollar. What can Franklin€™s management do to increase the cash available? Should management recommend that the board of directors declare a dividend? Explain. Alternate Problems Problem 2-1A Materiality Jane Erving, a newly hired accountant wanting to impress her boss, stayed late one night to analyze the long-distance calls by area code and time of day placed. She determined the monthly cost for the previous 12 months by hour and area code called.

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Franklin Co. Balance Sheet September 30, 2011 Cash $ 5,000 12,500 75,000 10,000 169,000 $271.500 Accounts payable Mortgage note Common stock-$1 par Retained earnings $ 5,000 150,000 50,000 66,500 Inventory Note receivable" Building/Land Total liabilities and Total assets stockholders' equity $271,500