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Adrian Fudge of the Fudge Corporation forecast the firm's financing needs quarter (October through December) following observations relative to pk and disbursements: • Interest on a $75,000 bank note (due next March) at an 8 percent annual rate is payable in December for the three-month period just ended. • The firm follows a policy of pE dividends. • Actual historical and future pr as follows: • The firm has a monthly rental expense of $ 5,000. • Wages and salaries for the com estimated at $25,000 per month. • Of the firm's sales, 25 percent i the month of the sale, 35 percE after the sale, and the remainin months after the sale. • Merchandise is purchased one sales month and is paid for in t sold. Purchases equal 75 perc€ firm's cost of goods sold is alsc sales. • Tax prepayments are made qua payment of $10,000 in October • Utility costs for the firm average 3 percent of sales and are paid in the month they are incurred. • Depreciation expense is $20,000 annually. Question 1 Prepare a monthly cash budget for the three-month period ending in December. Question 2 If the firm's beginning cash balance for the budget period is $7,000, and this is its desired minimum balance, determine when and how much the firm will need to borrow during the budget period The firm has a $50,000 line of credit with its bank, with interest (10 percent annual rate) paid monthly. For example, interest on a loan taken out at the end of September would be paid at the end of October and every month thereafter so long as the loan was outstanding.

Adrian Fudge of the Fudge Corporation forecast the firm's financing needs  quarter (October through December) following observations relative to pk and disbursements:

• Interest on a $75,000 bank note (due next March) at an 8 percent annual rate is payable in December for the three-month period just ended.

• The firm follows a policy of pE dividends.

• Actual historical and future pr as follows:

• The firm has a monthly rental expense of $ 5,000.

• Wages and salaries for the com estimated at $25,000 per month.

• Of the firm's sales, 25 percent i the month of the sale, 35 percE after the sale, and the remainin months after the sale.

• Merchandise is purchased one sales month and is paid for in t sold. Purchases equal 75 perc€ firm's cost of goods sold is alsc sales.

• Tax prepayments are made qua payment of $10,000 in October

• Utility costs for the firm average 3 percent of sales and are paid in the month they are incurred.

• Depreciation expense is $20,000 annually.

Question 1 Prepare a monthly cash budget for the three-month period ending in December.

Question 2 If the firm's beginning cash balance for the budget period is $7,000, and this is its desired minimum balance, determine when and how much the firm will need to borrow during the budget period The firm has a $50,000 line of credit with its bank, with interest (10 percent annual rate) paid monthly. For example, interest on a loan taken out at the end of September would be paid at the end of October and every month thereafter so long as the loan was outstanding.

 

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