Question
You are provided with the following information taken from Washburne Inc.s March 31, 2012, balance sheet. Cash $12,486 Accounts receivable 22,639 Inventory 36,623 Property, plant,
You are provided with the following information taken from Washburne Inc.s March 31, 2012, balance sheet.
Cash |
| $12,486 |
Accounts receivable |
| 22,639 |
Inventory |
| 36,623 |
Property, plant, and equipment, net of depreciation |
| 124,503 |
Accounts payable |
| 22,721 |
Common stock |
| 153,957 |
Retained earnings |
| 12,126 |
Additional information concerning Washburne Inc. is as follows.
1. |
| Gross profit is26% of sales. |
|
|
2. |
| Actual and budgeted sales data: |
|
|
|
| March (actual) |
| $46,751 |
|
| April (budgeted) |
| 71,414 |
3. |
| Cash collections expected in April are: | ||||
|
| March |
| $18,700 |
| (40% of $46,751) |
|
| April |
| 42,848 |
| (60% of $71,414) |
|
|
|
| $61,548 |
|
|
4. |
| Half of a months purchases are paid for in the month of purchase and half in the following month. Cash disbursements expected in April are: | ||||
|
| Purchases March | $22,721 | |||
|
| Purchases April | 28,333 |
|
|
|
|
|
| $51,054 |
|
|
|
5. |
| Cash operating costs are anticipated to be $11,710for the month of April. |
6. |
| Equipment costing $2,568will be purchased for cash in April. |
7. |
| The company wishes to maintain a minimum cash balance of $12,478. An open line of credit is available at the bank. All borrowing is done at the beginning of the month, and all repayments are made at the end of the month. The interest rate is14% per year, and interest expense is accrued at the end of the month and paid in the following month. |
Prepare a cash budget for the month of April. Determine how much cash Washburne Inc. must borrow, or can repay, in April.
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