Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

OPPO CASE 2: ANDERSON EQUIPMENT LTD. One day in March 2013, John Sutherland, industrial commissioner for the city South Elk, received a telephone call from

image text in transcribed
image text in transcribed
OPPO CASE 2: ANDERSON EQUIPMENT LTD. One day in March 2013, John Sutherland, industrial commissioner for the city South Elk, received a telephone call from Nick Faranda, president of Anderson F ment Ltd., who wanted to see him as soon as possible. When Sutherland arrived at Faranda's office, Faranda was sitting at his desk in over his current year's cash budget. Faranda informed Sutherland that as a resultat the revised credit restrictions adopted by his bank, he was being asked to prepare an estimate of his financial requirements for the balance of the calendar year. All major customers of the bank were asked to provide this information. Faranda also informed Sutherland that he was going to have a meet at he was going to have a meeting with Joanne Armstrong, the lending officer responsible for handling the companys ac that he wanted to show her his financial requirements for the rest of the Consequently, Faranda asked Sutherland to help prepare a budget fore hasis of the information available, Faranda felt that it would not be borrow funds before July 2013. The budget would therefore be prepared period July 1, 2013, to January 31, 2014. The marketing department provided the following sales forecast: indling the company's account, and equirements for the rest of the calendar year. help prepare a budget forecast. On the nat it would not be necessary to July August September October November December January $ 50,000 100,000 500,000 650,000 550,000 400,000 200,000 Ten percent of sales are for cash, 40% of sales are collected after 30 days, and the remaining 50% after 60 days. Purchases, which are 80% of sales, are incurred in the month in which the sales are made. These goods are paid 30% in cash and 70% within 30 days. Distribution and administrative expenses are $10,000 per month, plus 1% of monthly sales. Start-up costs in July are $30,000. Income taxes for the entire operating period are paid in April and are 40% of the profit. The monthly depreciation is $10,000. The company feels that it is necessary to maintain a minimum cash balance of $25,000 during the selling season. The cash balance on July 1 is $75,000. Question Prepare a monthly cash budget from July 1, 2013 to January 31, 2014

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

Step: 3

blur-text-image

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

Modern Auditing And Assurance Services

Authors: Philomena Leung, Paul Coram, Barry J. Cooper, Peter Richardson

6th Edition

1118615247, 9781118615249

More Books

Students also viewed these Accounting questions