CMA Study Group

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  • 1.  part 1 Question

    Posted 08-07-2012 04:48 AM
    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




    -------------------------------------------
    Ayda Fahim Samaan
    Accountant
    Mina Tex
    Sidi Beasher
    Egypt
    -------------------------------------------


  • 2.  RE:part 1 Question

    Posted 08-07-2012 05:18 AM
    Ayda,

    The answer is B.
    Total inflow: sales december+sales january=200,000+200,000=400,000.
    Total outflow: purchases february sales (paid in january)+purchases march sales (paid in february)+other expenses (excl depr)=(0.6*350,000)+(0.6*+400,000)+2*(25,000-5000)=490,000.
    Ending cash balance february=30,000+400,000-490,000=-60,000. Minimum cash balance=10,000, so the company needs to borrow 70,000.

    Regards

    -------------------------------------------
    Nicolaas Johannes Breman
    Consultant
    Conquaestor
    Assendelft
    Netherlands
    -------------------------------------------








  • 3.  RE:part 1 Question

    Posted 08-07-2012 07:58 AM
    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

    -------------------------------------------
    Patricia Abels CPA
    Academic
    The University of Findlay
    Findlay OH
    United States
    -------------------------------------------








  • 4.  RE:part 1 Question

    Posted 08-09-2012 03:28 AM

    the anser as follows:

    Monthly Sales:                    Dec              Jan          Feb            Mar
                                          200000         200000      350000     400000
    Collected:                           ---             200000      200000     350000

    Purchase 60% next sales  (120000)      (210000)    (240000)     -------
    Other Monthly Exp.           (20000)        (20000)      (20000)     (20000)
    Beg. Cash Balance             -------           30000         -------        -------
    Min. Cash Balance                                                   (10000)
                                                                                ----------- 
    He Should Bowrrow                                                 -70000
                                                                                 =====

    -------------------------------------------
    Moustafa Mohamed Aly Abdel Nabi
    Accountant
    BELRESHEED BLDG. CONT.
    Sharjah
    United Arab Emirates
    -------------------------------------------








  • 5.  RE: part 1 Question

    Posted 08-16-2017 11:21 AM
    I don't understand why February's beginning cash balance would be $0 if they are required to have $10k min balance?

    Thanks

    ------------------------------
    Jenna Araco

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