Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Anna Chan, the General Manager of Icy Investment Limited, faced the financial difficulty due toCOVID-19.ShehasalreadyaskedherAccountanttopreparethebudgetcashflowandtoproject the amount of cash shortage in the coming year. Then

Anna Chan, the General Manager of Icy Investment Limited, faced the financial difficulty due toCOVID-19.ShehasalreadyaskedherAccountanttopreparethebudgetcashflowandtoproject the amount of cash shortage in the coming year. Then she will plan to negotiate with banker toarrangethebankloan withher personal guaranteeto solvethe financial problem.

Icy Investment Limited from Thailand has provided the following budget amounts for the budgetperiod in 2021.

$

Beginningcashbalance

30,000

Cashcollections

683,000

Purchase of merchandise inventory

349,400

Sellingandadministrativeexpenses

70,700

Capitalexpenditures

88,600

A minimum cash balance of $280,000 is required to be maintained. The company can borrow inincrements of $10,000 as and when required. Assume the company can borrow the needed funds attheend ofthe period.

Question:

a) Calculatetheending cashbalanceforthebudget period.

b) Identifyandexplainatleasttwowaysthatcompanycanchangeitsinventorylevelinordertoachieve a better cash budget performance.

c) Anna Chan has been discussing with the directors of Icy Investment Limited about the stepstaken by accountants to ensure that financial statements are useful. She mentioned that theusefulness of information in the financial statements is determined primarily by two qualitativecharacteristics known as relevance and reliability in the view of the accounting profession.Explain tothedirectorsthemeaning ofrelevance andreliability.

d) The financial director has not discussed the proposed budgeting system with junior managers.Sheisconsideringimposingproductionandsalesbudgets uponthem,without theirinvolvement. Explain the following approaches to budget setting and give two advantages ofeachapproach.

  1. A"top-down"approach;
  2. A" bottom-up" approach.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting Tools For Business Decision Making

Authors: Paul D. Kimmel,  Jerry J. Weygandt,  Jill E. Mitchell

10th Edition

1119791081, 978-1119791089

More Books

Students also viewed these Accounting questions