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All sales are on credit. Collections are as follows: 22% is collected in the month...

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Accounting

All sales are on credit. Collections are as follows: 22% is collected in the month of the sale, and the remaining 78% is collected in the month following the sale. Merchandise purchases cost $110 per unit. For those purchases, 60% is paid in the month of purchase and the other 40% is paid in the month following purchase. The company has a policy to maintain an ending monthly inventory of 23% of the next months unit sales. The May 31 actual inventory level of 1,150 units is consistent with this policy. Selling and administrative expenses of $113,000 per month are paid in cash. The companys minimum cash balance at month-end is $130,000. Loans are obtained at the end of any month when the preliminary cash balance is below $130,000. Any preliminary cash balance above $130,000 is used to repay loans at month-end. This loan has a 0.5% monthly interest rate. On May 31, the loan balance is $45,000, and the companys cash balance is $130,000.

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