82. CSO: 1A4b LOS: 1A4x
Tidwell Corporation sells a single product for $20 per unit. All sales are on account, with
60% collected in the month of sale and 40% collected in the following month. A
schedule of cash collections for January through March of the coming year reveals the
following receipts for the period.
Cash Receipts
January February March
December receivables $32,000
From January sales 54,000 $36,000
From February sales 66,000 $44,000
From March sales 72,000
Other information includes the following.
• Inventories are maintained at 30% of the following month’s sales.
• Tidwell desires to keep a minimum cash balance of $15,000. Total
payments in January are expected to be $106,500, which excludes $12,000
of depreciation expense. Any required borrowings are in multiples of
$1,000.
• The December 31 balance sheet for the preceding year revealed a cash
balance of $24,900.
Ignoring income taxes, the financing needed in January to maintain the firm’s minimum
cash balance is
a. $8,000.
b. $10,600.
c. $11,000.
d. $23,000.
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