84. CSO: 1A4b LOS: 1A4x
The Mountain Mule Glove Company is in its first year of business. Mountain Mule had a
beginning cash balance of $85,000 for the quarter. The company has a $50,000 short-
term line of credit. The budgeted information for the first quarter is shown below.
January February March
Sales $60,000 $40,000 $50,000
Purchases 35,000 40,000 75,000
Operating costs 25,000 25,000 25,000
All sales are made on credit and are collected in the second month following the sale.
Purchases are paid in the month following the purchase, while operating costs are paid in
the month that they are incurred. How much will Mountain Mule need to borrow at the
end of the quarter if the company needs to maintain a minimum cash balance of $5,000 as
required by a loan covenant agreement?
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a. $0.
b. $5,000.
c. $10,000.
d. $45,000.
Section B: Performance Management
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