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7 years ago
Stockett, Inc. has prepared its third quarter budget and provided the following data:

   Jul   Aug   Sep
Cash collections   $50,000   $39,700   $47,600
Cash payments:                
Purchases of direct materials   30,000   22,000   18,000
Operating expenses   12,300   8,700   11,700
Capital expenditures   13,000   24,400   0

The cash balance on June 30 is projected to be $4,500. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 4%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash. How much will the company have to borrow at the end of August?
A) $15,000
B) $20,000
C) $5,000
D) $10,000
Textbook 
Horngren's Financial & Managerial Accounting, The Financial Chapters

Horngren's Financial & Managerial Accounting, The Financial Chapters


Edition: 5th
Authors:
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#2
7 years ago
Makes perfect sense, thx
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#3
3 years ago
thank you
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