Answer:
Compute the amount of funds Ms. Bragg needs to borrow for June.
Determine the amount of interest expense the restaurant will report on the June pro forma income statement.
- $0, money is borrowed on June 30th there is no interest expense during June
What amount will the restaurant report as interest expense on the July pro forma income statement
Explanation:
accounts receivable May 31 is $56,000.
budgeted cash sales for June $145,000
credit sales for June $591,000
65% of credit sales are collected in current month, 35% collected next month
suppliers are paid on the last day of the month
budgeted cash payments for June 30th = $710,000
cash balance $38,000
how much money does Ms. Bragg need to borrow on June 30?
total cash collections in June = $56,000 (from previous month) + $145,000 (cash sales) + $384,150 (65% of $591,000) = $585,150
payments - cash collected = $710,000 - $585,150 = $124,850
money borrowed on June 30 = $124,850 + $38,000 (desired cash balance) = $162,850
interest expense during July = $162,850 x 10% x 1/12 = $1,357
