The Corner Hardware Store is developing a budget to estimate monthly cash balances in the near future.
Question:
The Corner Hardware Store is developing a budget to estimate monthly cash balances in the near future. At the end of December, the cash balance is \($6,000\) and the accounts payable balance is \($30,000\) (reflecting December’s purchases of inventory). The Corner Hardware Store expects \($40,000\) in sales in January and an increase in sales of 2 percent per month over the next six months. All sales are on a cash basis. Inventory purchases are expected to rise at the same rate as are sales. Inventory purchases are paid in the month following the purchase. Other monthly cash outflows are expected to be \($10,000\) per month.
a. How much money will the store have to borrow to pay \($20,000\) for a new computer system in May?
b. How much will the store have to borrow to pay \($20,000\) for a new computer system in May, if sales and purchases are expected to increase by 5 percent per month?
Step by Step Answer:
Management Accounting In A Dynamic Environment
ISBN: 9780415839020
1st Edition
Authors: Cheryl S McWatters, Jerold L Zimmerman