ACCT504 Case Study 3 (Learning Objective 5 Construct and use a cash budget) Nathan Farmer, chief financial officer of Wang Appliance Store, is responsible for the company s budgeting process Farmer s staff is preparing the Wang cash budget for 2014 A key input to the budgeting process is last year s statement of cash flows, which follows (amounts in thousands) Wang Appliance Store Statement of Cash Flows 2013 (in thousands) Cash Flows from Operating Activities Collections from customers $51,000 Interest Received 500 Purchase of inventory (36,000) Operating expenses (10,200) Net cash provided by operating activities 5,300 Cash Flows from Investing Activities Purchase of equipment (3,500) Purchase of investments (500) Sale of investments 1,000 Net cash used for investing activities ( 3,000 ) Cash Flows from Financing Activities Payment of long term debt (400) Issuance of Stock 2,000 Payment of cash dividends (500) Net cash provided by financing activities 1,000 Cash Increase (decrease) in Cash 3,300 Cash, beginning of year 2,900 Cash, end of year 5,900 Requirements 1 Prepare the Wang cash budget for 2014 Date the budget simply 2014 and denote the beginning and ending cash balances as beginning and ending Assume the company expects 2014 to be the same as 2013, but with the following changes a In 2014, the company expects a 20 increase in collections from customers and a 30 increase in purchases of inventory b There will be no sales of investments in 2014 c Wang does not plan to issue stock in 2014 d Wang plans to end the year with a cash balance of $5,550 CASE STUDY 3Cash Budget Template Wang Appliance Store Cash Budget For 2014 Month Cash balance Add Receipts Collections from customers Receipt of Interest Total Available Cash 0 Budgeted Cash Payments Less Disbursements Purchases of inventory Operating expenses Purchase of equipment Purchase of Investments Payment of Dividends Payment of long term Debt Total disbursements Cash available (needed) before new financing Budgeted cash balance ending Cash available for additional investments or (new financing needed)

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ACCT504 Case Study 3 (Learning Objective 5: Construct and use a cash budget) Nathan Farmer, chief financial officer of Wang Appliance Store, is responsible for

ACCT504 Case Study 3

(Learning Objective 5: Construct and use a cash budget) Nathan Farmer, chief financial officer of Wang Appliance Store, is responsible for the company?s budgeting process. Farmer?s staff is preparing the Wang cash budget for 2014. A key input to the budgeting process is last year?s statement of cash flows, which follows (amounts in thousands):

Wang Appliance Store

Statement of Cash Flows

2013

(in thousands)

Cash Flows from Operating Activities

Collections from customers $51,000

Interest Received 500

Purchase of inventory (36,000)

Operating expenses (10,200)

Net cash provided by operating activities 5,300

Cash Flows from Investing Activities

Purchase of equipment (3,500)

Purchase of investments (500)

Sale of investments 1,000

Net cash used for investing activities (3,000 )

Cash Flows from Financing Activities

Payment of long term debt (400)

Issuance of Stock 2,000

Payment of cash dividends (500)

Net cash provided by financing activities 1,000

Cash

Increase (decrease) in Cash 3,300

Cash, beginning of year 2,900

Cash, end of year 5,900

? Requirements

1. Prepare the Wang cash budget for 2014. Date the budget simply ?2014? and denote the beginning and ending cash balances as ?beginning? and ?ending.? Assume the company expects 2014 to be the same as 2013, but with the following changes:
- a. In 2014, the company expects a 20% increase in collections from customers and a 30% increase in purchases of inventory.
- b. There will be no sales of investments in 2014.
- c. Wang does not plan to issue stock in 2014.
- d. Wang plans to end the year with a cash balance of $5,550.

CASE STUDY 3Cash Budget Template Wang Appliance Store Cash Budget For 2014 Month Cash balance Add: Receipts Collections from customers Receipt of Interest Total Available Cash 0 Budgeted Cash Payments Less: Disbursements Purchases of inventory Operating expenses Purchase of equipment Purchase of Investments Payment of Dividends Payment of long-term Debt Total disbursements Cash available (needed) before new financing - Budgeted cash balance ending Cash available for additional investments or (new financing needed)