Working Capital Needs and Short-Term Loans. Every year Blue Knob, Inc. has operated at about the same level, but sales vary substantially by season. As a result, the company needs short-term borrowings which are repaid when the cash position improves. Key month-end balances are given below:

A target cash balance of $100,000 each month is desired for transaction purposes.
Cash in excess of that amount is to be invested in U.S. treasury bills, and loans are to be made as necessary. A short-term borrowing line of credit has been arranged with Blue Knob’s lead commercial bank.
Required:
Assume that at December 31, 1998, the balance sheet shows no short-term investments or short-term borrowings. No major balance changes are expected in other accounts during the next six months. Plan borrowings and investments by month for the first half of 1999.

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Cash Accounts Receivable Accounts Inventories Payable December 1998 actual $100,000 $ 80,000 $200,000 $190,000 January 1999 90,000 100,000 240,000 220,000 February.. 70,000 110,000 280,000 170,000 March. 40,000 150,000 250,000 140,000 April May June 30,000 250,000 190,000 100,000 70,000 275,000 110,000 80,000 120,000 160,000 80,000 70,000