The treasurer for Chic Man Clothing must decide how much money the company needs to borrow in July. The balance sheet for June 30, 2010 is presented below:
Chic Man Clothing Balance Sheet
June 30, 2010
Cash$87,000Accounts payable$550,000
Marketable securities123,000Long-term debt350,000
Accounts receivable360,000Common stock130,000
Inventory300,000Retained earnings270,000
Total current assets870,000Total liabilities and stockholders' equity1,300,000
Fixed assets430,000
Total assets$1,300,000
The company expects sales of $400,000 for July. The company has observed that 25% of its sales is for cash and that the remaining 75% is collected in the following month. The company plans to purchase $345,000 of new clothing. Usually 70% of purchases is for cash and the remaining 30% of purchases is paid in the following month. Salaries are $135,000 per month, lease payments are $35,000 per month, and depreciation charges are $20,000 per month. The company plans to purchase a new van for $60,000 in July and sell its marketable securities for $123,000. If the company must maintain a minimum cash balance of $25,000, how much money must the company borrow in July?
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