Reference no: EM132957899

You are provided with the following information taken from Larkspur, Inc.'s March 31, 2022, balance sheet.

Cash $ 12,060

Accounts receivable 23,980

Inventory 37,450

Property, plant, and equipment, net of depreciation 121,200

Accounts payable 22,760

Common stock 152,100

Retained earnings 11,630

Additional information concerning Larkspur, Inc. is as follows.

1. Gross profit is 24% of sales.

2. Actual and budgeted sales data:

March (actual) $47,400

April (budgeted) 73,000

3. Sales are both cash and credit. Cash collections expected in April are:

March $18,960 (40% of $47,400)

April 43,800 (60% of $73,000)

$62,760

4. Half of a month's purchases are paid for in the month of purchase and half in the following month. Cash disbursements expected in April are:

Purchase March $22,760

Purchase April 28, 880

$51,640

5. Cash operating costs are anticipated to be $12,110 for the month of April.

6. Equipment costing $2,850 will be purchased for cash in April.

7. The company wishes to maintain a minimum cash balance of $12,010. An open line of credit is available at the bank. All borrowing is done at the beginning of the month, and all repayments are made at the end of the month. The interest rate is 12% per year, and interest expense is accrued at the end of the month and paid in the following month.

Problem 1: Prepare a cash budget for the month of April. Determine how much cash Larkspur, Inc. must borrow, or can repay, in April