Owen Surf Sports is an idea of two budding entrepreneurs. Their plan is to sell kiteboards from a store in the local town.

Between them, they invest $$46,000$ in capital and are in the process of applying for a bank loan, also for $$46,000.$ The

loan would be repaid in four years. The owners will also pay the bank annual interest at a rate of $6$ percent.

The owners are working on a business plan that the bank has requested. The store would sell only two models of kites

initially, the $x-1$ and the $x-2.$ Data on the kites are given as follows:

Additional information on the planned operations for the year includes the following:

Equipment costing $$56,000$ will be purchased for cash when the store opens. The equipment will be depreciated over

five years using straight$-$line depreciation.

The owners expect sales to occur uniformly over the year. Sales will be both for cash $(60$ percent$)$ and on account $(40$

percent$).$ Sales on account are assumed to be collected in two months.

The owners will maintain inventory equal to one$-$half of a month's sales. All kites will be purchased from the

manufacturer on credit with payment made one month after purchase.

Annual cash selling, general, and administrative expenses are $$53,000$ fixed plus $10$ percent of revenues.

The applicable income tax rate is $20$ percent.

Required:

a$.$ Prepare a cash budget for the year.

b$.$ The owners want to ensure that they have cash on hand at the end of the year equal to the current accounts payable balance on December $31.$ Will the store meet that requirement?

c$.$ Consider only the assumption about the percentage of sales that will be made on account $($currently $40$ percent$).$ What assumption about this percentage would exactly achieve the goal set by the owners in requirement $($b$)?$