ACCT 556 RANK Learn by Doing/acct556rank.com ACCT 556 RANK Learn by Doing/acct556rank.com | Page 6

12% of the sales are collected in the 2nd month following the sale. 5% of the sales are collected in the 3rd month following the sale. The following information regarding costs is available: The cost of goods sold is 54% of sales Items for sale are purchased in the month of the sale. 80% of accounts payable are paid in the month following when the cost is incurred. 20% of accounts payable are paid in the 2nd month following when the cost is incurred. Wages are 28% of sales and are paid currently Annual general and administrative costs are $1,411,200 and are incurred evenly throughout the year. Annual property taxes are $14,000 and are paid semi annually in June and October. A $10,000 cash capital purchase will be made in April. The beginning cash balance in April is expected to be $47,000. The Hale Company has a policy of maintaining a minimum cash balance of $45,000. The company has an arrangement with a local bank for a line of credit that carries a 10% annual interest rate. If the ending monthly balance falls below $45,000, the company will borrow against the line of credit so that the minimum balance can be maintained. If the company has borrowed against the line of credit and a cash balance is expected to be above $45,000 at the end of a particular month, then repayments will be made bringing the cash balance down to $45,000. Interest on the line of credit is paid monthly. Assume that all line of credit transactions occur on the last day of the month. Required: Prepare a cash budget for the Hale Company for the 2nd quarter of the year. Include April, May, June, and a quarter total in your budget. ===================================================================================== ACCT 556 Week 6 Homework Problem