Correct answer b. Monroe will need to borrow $70,000 as shown below.
January February
Opening balance $ 30,000 $ 0
Plus collections 200,000 200,000
Less purchases* 210,000 240,000
Less other expenses 20,000 20,000
Closing balance $ 0 $-60,000
Required borrowing = $60,000 + $10,000 = $70,000
*January = Feb. sales $350,000 x .6
February = March sales $400,000 x .6
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Patricia Abels CPA
Academic
The University of Findlay
Findlay OH
United States
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Original Message:
Sent: 08-07-2012 04:48 AM
From: Ayda Fahim Samaan
Subject: part 1 Question
hi every body
Monroe Products is preparing a cash forecast based on the following information.
- Monthly sales: December $200,000; January $200,000; February $350,000;
March $400,000.
- All sales are on credit and collected the month following the sale.
- Purchases are 60% of next month's sales and are paid for in the month of
purchase.
- Other monthly expenses are $25,000, including $5,000 of depreciation.
If the January beginning cash balance is $30,000, and Monroe is required to maintain a
minimum cash balance of $10,000, how much short-term borrowing will be required at
the end of February?
a. $60,000.
b. $70,000.
c. $75,000.
d. $80,000.
thankes
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Ayda Fahim Samaan
Accountant
Mina Tex
Sidi Beasher
Egypt
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