Management wants to know if there will be a need for short-term financing in February. Essential information is as follows:Estimated sales for January and February are $1.1 million and $750,000, respectively.Sixty percent of sales are for cash and 40 percent are credit sales that are collected the next month.Cash disbursements that vary with sales are 35 percent of sales.Fixed operating disbursements are $400,000 a month.Depreciation expense is $50,000 a month.A tax payment of $70,000 is due in January.A bond payment of $250,000 is owed and will be due in February.The cash balance at the beginning of January is $12,000.Management seeks a minimum cash balance of $9,000.December credit sales were $110,000.Round your answers to the nearest dollar. Use a minus sign to enter shortage of cash, if any. JanuaryFebruaryExcess (shortage) of cash$ $ The firm need short-term funds in February.

Based on the calculations, there is an excess of cash in February, and no short-term funds are…

Answered: Management wants to know if there will…

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 34E: A companys sales for the coming months are as follows: About 20 percent of sales are cash sales, and...

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Question

Management wants to know if there will be a need for short-term financing in February. Essential information is as follows:

Estimated sales for January and February are $1.1 million and $750,000, respectively.
Sixty percent of sales are for cash and 40 percent are credit sales that are collected the next month.
Cash disbursements that vary with sales are 35 percent of sales.
Fixed operating disbursements are $400,000 a month.
Depreciation expense is $50,000 a month.
A tax payment of $70,000 is due in January.
A bond payment of $250,000 is owed and will be due in February.
The cash balance at the beginning of January is $12,000.
Management seeks a minimum cash balance of $9,000.
December credit sales were $110,000.

Round your answers to the nearest dollar. Use a minus sign to enter shortage of cash, if any.