The ZYX Corporation Is Planning to Request a Line of Credit

question 11

Essay

The ZYX Corporation is planning to request a line of credit from its bank and wants to estimate its cash needs for the month of September. The following sales forecasts have been made for 2014:
July $500,000
August $400,000
September $300,000
October $200,000
November $100,000
Collection estimates were obtained from the credit collection department as follows: 20% collected within the month of sale; 70% collected the first month following the sale; and 10% collected the second month following the sale. Payments for labor and raw materials are typically made in the month in which these costs are incurred. Total labor and raw material costs each month are 50% of sales. General administrative expenses are $30,000 per month, lease payments are $10,000 per month, and depreciation charges are $20,000 per month. The corporation tax rate is 40%; however, no corporate taxes are paid in September. Prepare a cash budget for September.

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Definitions:

Scrotum

The pouch of skin that hangs below the penis in males, housing the testicles and parts of the spermatic cord, playing a role in temperature regulation for sperm production.

Prostate

A gland in male mammals surrounding the neck of the bladder and urethra, involved in the production of seminal fluid.

Anus

The terminal end of the digestive tract where feces are expelled from the body.

Azoospermia

A medical condition characterized by the absence of sperm in the semen.