ACCT 386 - Week 5 - Homework - Question 8

ACCT 386 - Week 5 - Homework - Question 8
Price: $4.99
This Tutorial contains following Attachments
  • ACCT 386 - Week 5 - Homework - Question 8.doc
Qty:     - OR -   Add to Wish List

ACCT 386 - Week 5 - Homework - Question 8

There may be chances that the figures given in our question and your question doesn't matches. Don't worry, we are here to help you. Just write to us at and your answer is with you in no time.


Question 8

The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods:




  Current assets as of March 31:






     Accounts receivable






  Buildings and equipment, net



  Accounts payable



  Capital stock



  Retained earnings




The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales.)


Actual and budgeted sales data are as follows:



  December (actual)











Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales.


Each month’s ending inventory should equal 20% of the following month's budgeted cost of goods sold.


One-quarter of a month’s inventory purchases is paid for in the month of purchase; the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory.


Monthly expenses are as follows: commissions, $16,000; rent, $1,600; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $950 for the quarter and includes depreciation on new assets acquired during the quarter.


Equipment will be acquired for cash: $4,100 in January and $8,340 in February.


Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.