Roosevelt Inc., a consulting service, has a history of paying annual dividends of $1 per share. Management is trying to determine whether the company will have adequate cash on December 31, 2018, 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 decreasing 5% each month.

• Operating expenses are paid in cash in the month incurred. Average monthly expenses are $10,000 (excluding the biweekly payroll).

• Biweekly payroll is $4,500, and it will be paid December 15 and December 31.

• Unearned revenue is expected to be earned in December. This amount was taken into consideration in the expected sales volume.

Roosevelt Inc.

Balance Sheet

December 1, 2018

*The note payable plus 3% interest for six months is due January 15, 2019.
Required
Determine the cash that Roosevelt will have available to pay a dividend on December 31, 2018. Round all amounts to the nearest dollar. Should management recommend that the board of directors declare a dividend? Explain.

Transcribed Image Text:

s 15,000 40,000 120,000 Uneamed revenue Note payable Common st Retained eamings 2,000 30,000 50,000 Accounts receivable Computer equipment ock $2 par Total liabilities and Total assets stockholders' equity $175,000