29 Jun Question (Preparation of a cash budget)
Question
(Preparation of a cash budget)
The Sharpe Corporation’s projected sales for the first eight months of2011 are as follows:
Of Sharpe’s sales, 10 percent is for cash, another 60 percent is collected in the month following the sale, and 30 percent is collected in the second month following the sale.
November and December sales for 2010 were $219,500 and $176,000, respectively.
Sharpe purchases its raw materials two months in advance of its sales equal to 60 percent of their final sales price. The supplier is paid one month after it makes delivery.
For example, purchases for April sales are made in February and payment is made in March. In addition, Sharpe pays $9,000 per month for rent and $20,900 each month for other expenditures. Tax prepayments of $22,700 are made each quarter, beginning in March.
The company’s cash balance at December 31, 2010, was $21,100; a minimum balance of $15,000 must be maintained at all times.
Assume that any short-term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds are available. Interest on short-term loans (11 percent) is paid monthly.
Borrowing to meet estimated monthly cash needs takes place at the beginning of the month. Thus, if in the month of April the firm expects to have a need for an additional $59,990, these funds would be borrowed at the beginning of April with interest of$550 (i.e., 11%x 1/ 12 x $59,990) owed for April being paid at the beginning of May.
a. Prepare a cash budget for Sharpe covering the first seven months of 2011.
b. Sharpe has $200,700 in notes payable due in July that must be repaid or renegotiated for an extension. Will the firm have sufficient cash to repay the notes?
a. Prepare a cash budget for Sharpe covering the first seven months of 2011. Complete (m
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.