Question

Copland Supplies Company is a retail store that purchases merchandizes from several makers of office equipment. Actual balance sheet is presented below: Balance Sheet As of September 30, 2018 $25,000 $70,000 Cash Accounts Receivable (Net of allowance for uncollectible accounts) Inventory Property Plant Equipment (Net of S640,000 accumulated depreciation) Total Assets Accounts Payable Common Stock Retained Eamings Total Liabilities and Stockholders'Equity $79,625 $1,225,375 $1,400,000 $170,000 $1,050,000 $180,000 S1,400,000 To prepare budgets, the budget officer gathered addition budget data: Sales are budgeted at $350,000, $260,000, and $230,000, all on credit, for October, November, and December, respectively The company wil declare $15,000 dividend in October, which will be paid in November Collections are expected to be 55 % in the month of sale, 40%% in the month following the sale, and 5 % uncollectible. Copland Supplies recognizes bad debt expenses in the month sales are made. The cost of goods sold is 65 % of sales. The ending merchandise inventory should be 35 % of the folllowing month sales needs .Payment for merchandise purchases is expected to be 60 % in the month of purchase with the remaining paid in the following month Monthly selling and administrative expenses to be paid in cash are $32,000. .Monthly depreciation is $20,000. 18 In addition to the information given above, assume Copland Supplies requires $30,000 minimum cash balance. Cash can be borrowed at any exact amount at the beginning of each month from company's credit line at a local bank. Interest, 2% monthly, are paid at the end of each month. Determine total amount of cash Copland Supplies needs to borrow from the bank for the month October $68,715 A. В. $38,715 с. $30,000 $70,118 E. D. None of the above

Answer 1

a) $ 68,715

Particular	Amount
Cash collected from Sales. [$ 350,000 * 55%]	$ 192,500
Cash collected from accounts receivable	$ 70,000
Total Cash collection	$ 262,500
Payment for purchases ([ $ 350,000 * 65% * 55% + $ 260,000 * 65% * 35%] * 60%)	$ 124,215
Payment of Accounts payable	$ 170,000
Payment of selling and administrative expenses	$ 32,000
Total Payment	$ 326,215
Change in cash	$ (63,715)
Opening Cash Balance	$ 25,000
Closing Cash Balance	$ 30,000
Cash Borrowed [ $ 63,715 + $ 30,000 - $ 25,000]	$ 68,715