2-17. Finn Fixes is a new charity that repairs donated cars for use by unemployed job seekers. Finn collects the cars from area junkyards. The first year Finn is in operation, jobs programs bought cars from the organization for $60,000. They paid Finn $45,000 during the year and owe $15,000. Finn uses donated, unskilled labor and free garage space at a local high school. Its only cost is for parts. Total parts cost $58,000 for the year. During that first year Finn paid its parts suppliers $52,000. It owes its suppliers the balance. 1. What is the profit or loss to Finn Fixes on a cash basis? 2. What is the profit or loss to Finn Fixes on an accrual basis? 3. If Finn Fixes were to stop operating at the end of the first year but received payment from the jobs programs and paid its suppliers, what would its cash budget for the next year be? 4. How much cash would Finn Fixes have on hand at the end of the second year? How does that amount compare to its budgeted accrual basis profit or loss for the first year? 5. Which basis reflects the long-term stability of the organization? Problem 2-17 Cash Budget Operating Budget First Year Collections/Revenues Disbursements/Expenses Net Cash Flow/ Profit or Loss $ $ Second Year Collections Disbursements Net Cash Flow Cash Budget $ $ $ Plus First-Year Cash Balance Cash at End of Year Two $ $ Cash at the end of year 2 is the same as the accrual basis. Accrual basis better refelcts long-term stability of organization