1. Company ABC has borrowed $21 million under a $25 million revolving credit facility; actual borrowings that is subject to a borrowing base.

a) Calculate the maximum borrowing capacity of Company at 12/31/20 using the following information. 6 pts

b) Is the Company in compliance with its borrowing base? Show your calculation. 2 pts

Borrowing Base: 80% of Eligible Accounts Receivable and 50% of Eligible Inventories

Ineligible Accounts Receivable: More than 90 days past due

Ineligible Inventory: Work-in-process

Finished Goods more than 45 days old

Total Accounts Receivable on the books on 12/31/20: $20 million

Aging: Current 17.0

1 30 days late 1.0

31 60 days late 0.5

61 90 days late 0.1

91 120 days late 0.2

Over 120 days late 1.2

Total Inventories on the books on 12/31/20: $18 million

Raw Materials $3.5

Work-in-Process $10.0

Finished Goods $4.5

Aging: 1 to 45 days: 70%

45 to 90 days: 20%

91 and more: 10%