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Brown Ltd. is trying to decide whether it is going to need to take a loan in coming January to buy a new microcomputer system.
Brown Ltd. is trying to decide whether it is going to need to take a loan in coming January to buy a new microcomputer system. The microcomputer will cost $9.450. The president, William Brown, has collected the following information about her operations as at December 31: 1. Balance of selected ledger accounts: Cash $3,150 Accounts payable 6,300 2. Sales history and forecast (unit selling price, $12): October (actual) $47,250 November (actual) 35,700 December (actual) 47,250 January (forecast) 63,000 . 4. All sales are on credit and are due 30 days after the sale. Cash payments for purchases are as follows: two-thirds in the month of purchase; one-third in the month after that. Brown Ltd. collects 50% of a month's sales one month after the sale and 45% two months after the sale; 5% are uncollectible. 5. 6. 7. The company purchases inventory as required under terms of 2/10, net 30. It always takes the 2% discount, but records purchases at gross cost. Inventory costs $6 per unit, gross. Other expenses, all paid in cash as incurred, average about 30% of the sales dollar amount. Depreciation is part of these expenses and costs $3,150 per month. Brown Ltd. keeps a minimum cash balance of $4,200. 8. 9
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