655 d Kat Ltd.'s September balance sheet contains the following information: Cash Accounts receivable,. Allowance for doubtful accounts Merchandise inventory $ 37,500 (de) 126,000 (dr) 2,800 (cr) 26,250 (dr) Management has designated $37,500 as the firm's minimum monthly cash balance. Other Information about the firm and its operations is as follows: a. Sales revenues of $350,000, $420,000, and $312.500 are expected for October, November, and December, respectively. All goods are sold on account. b. The collection pattern for accounts receivable is 60% in the month of sale, 39% in the month following the month of sale, and 1% uncollectible, which is set up as an allowance c. Cost of goods sold is 60% of sales revenues. d. Management's target ending balance of merchandise inventory is 10% of the current month's budgeted cost of goods sold. e. All accounts payable for inventory are paid in the month of purchase 1. Other monthly expenses are $49,250, which includes $3,500 of depreciation and $2.000 of bad debt expense. g. In the event of a shortfall, the company borrows money. In contrast, in the event of excess cash, the company invests in short-term investments. Borrowings and investments are assumed to be made at the end of a month in increments of $6,250 h. Interest on borrowings is 10% per year, payable every quarter on the accumulated amount of the loan; similarly, interest earned on investments is 8% per year on the accumulated investments and is received every quarter. Investments can be matured and the principal amount redeemed in June or December of a year. Prev 1 of 1 Next