Reference no: EM132962623

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

Cash $ 11,950

Accounts receivable 21,490

Inventory36,430

Property, plant, and equipment, net of depreciation 121,600

Accounts payable 22,860

Common stock 152,400

Retained earnings 12,600

Additional information concerning Larkspur, Inc. is as follows.

1. Gross profit is 27% of sales.

2. Actual and budgeted sales data:March (actual)$46,700April (budgeted)71,300

3. Sales are both cash and credit. Cash collections expected in April are:March$18,680(40% of $46,700)April42,780 (60% of $71,300)$61,460

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:

Purchases March  $22,860

Purchases April 28,170

$51,030

5. Cash operating costs are anticipated to be $11,840 for the month of April.

6. Equipment costing $2,970 will be purchased for cash in April.

7. The company wishes to maintain a minimum cash balance of $12,790. 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 15% 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.