9. Borrowing and Repayments:
Any borrowing will take place on the first day of the quarter and any repayments are paid at the end of the quarter. All borrowing and payments are made in increments of $1,000. Interest on borrowing can be ignored.
Required: Prepare a cash budget for the first year of operation in Canmore by quarter and in total. Show clearly on your budget the quarter(s) in which borrowing will be needed and the quarter(s) in which repayments can be made, as requested by the companys bank.

Note 1: Financing Calculations
Cash excess (Deficiency)
Minimum cash balance
Amount to borrow (repay)
Borrowing (Repayments) Rounded to increment of $1,000

Management has provided the following income statement to the bank manager the expected Static Budget % Amount Sales in Units 4,040 Sales 505,000 100% Less: Variable Costs: Cost of Goods Sold 225,000 45% Sales Commissions 75,750 15% Total Variable Costs 300.750 60% Contribution Margin 204,250 40% Less: Fixed Costs: Advertising 21,0001 Property Taxes 10,000 Rent 48,000 Salaries & Wages 105,000 Total Fixed Costs 184,000 Net Operating Income 20.250 Question 5 -Cash Budget (30 marks) Mountain Sports has aquired an open line of credit up to a maximum of $350,000. It will be necessary to convince the bank manager of this new Canmore branch ability to repay its line of credit including any interest Management has provided the following list of assumptions to help in the preparation of the cash budget (note: you will need to use the projected income statement provided in Question 4 to complete the cash budget): 1. Beginning cash balance invested by owners 5 60,000 Quarter 1 Quarter 2 Quarter 3 Quarter 4 2. Sales by quarter (as of total projected sales) 249 2496 2896 3. Type of collections from customers Cash Sales Credit Sales (accounts receivable 429 589 Cash sales are collected in the quarter of the sale, all credit sales are collected in the quarter after the sale. 4. Merchandise purchases Merchandise purchases (cost of goods sold) are all paid in the quarter following purchase. (Quarter 1 purchases are bought in Quarter 1 but paid for in quarter 2). 5. Operating expenses All other operating expenses (all expenses except cost of goods sole) are paid on a monthly basis. 6. Required investment in equipment paid in cash in the first quarter 131,000 S 7. Quarterly income tax payments paid in cash S 8,000 8. Minimum cash balance s 25.000 Mountain Sports Cash Budget For the year ended December 31 4 Quarter 2 2496 $121,2001 Year Summary 10091 $505,000 Percent of Sales Estimated Sales 3 2496 $121,200 2496 $121.2001 2896 $141,400 Note from Instructor Total sales amount taken from question 4 Remember to refer to question 4 as this cash budget is a continuation of the Canmore expansion introduced in Question 4. This will be important for the cash disbursements as well! CASH BALANCE, Beginning S 60,000 Collections from customers: Cash Sales Credit Sales CASH AVAILABLE Less: Cash Payments Merchandise purchases (COGS) Sales Commissions Advertising 46 Sales Commissions 47 Advertising 48 Property Taxes 49 Rent 50 Salaries & Wages 51 Equipment Purchase Income tax Installment 52 53 Total Disbursements 54 Cash Excess (Deficiency) 55 Financing (Note 1) 56 Borrow Repayment of Principal (show as negative) 57 58 Net Financing 59 Cash Balance Ending