The Carlquist Company Makes and Sells a Product Called Product $\bullet$

question 34

Multiple Choice

The Carlquist Company makes and sells a product called Product K.Each unit of Product K sells for $24 dollars and has a unit variable cost of $18.The company has budgeted the following data for November:

$\bullet$ Sales of $1,152,200,all in cash.
$\bullet$ A cash balance on November 1 of $48,000.
$\bullet$ Cash disbursements (other than interest) during November of $1,160,000.
$\bullet$ A minimum cash balance on November 30 of $60,000.

If necessary,the company will borrow cash from a bank.The borrowing will be in multiples of $1,000 and will bear interest at 2% per month.All borrowing will take place at the beginning of the month.The November interest will be paid in cash during November.

The amount of cash needed to be borrowed on November 1 to cover all cash disbursements and to obtain the desired November 30 cash balance is:

• A)$20,000
• B)$21,000
• C)$37,000
• D)$38,000

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Definitions:

Personal Property Legislation

Laws and regulations governing the rights, ownership, and disputes of personal property, which is any movable property that is not fixed immovably to land.

Chattel Mortgage

A loan that is secured by movable personal property, such as a vehicle or mobile home, which the borrower can use while paying off the loan.

Debenture

A debt security issued by a corporation that may or may not have specific assets of the corporation pledged as security for payment.

Lien

With respect to goods, it is the right to retain the goods until payment is made.