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 company's bank. Mountain Sports Cash Budget For the year ended December 31 4 Note f Quarter 2 26% $134420 1 27% $139,590 Percent of Sales Estimated Sales 3 25% $129,250 Year Summary 100% $517.000 22% $113,740 Total Remen budget introdu the cash S 55,000 CASH BALANCE, Beginning Collections from customers: Cash Sales 2 Credit Sales 3 CASH AVAILABLE Less: Cash Payments 5 Merchandise purchases (COGS) 6 Sales Commissions 7 Advertising 8 Property Taxes 19 Rent 60 Salaries & Wages 51 Equipment Purchase 52 Income tax installment 53 Total Disbursements 54 Cash Excess (Deficiency) 55 Financing (Note 1) 56 Borrow Repayment of Principal (show as 57 negative) SB Net Financing 59 Cash Balance, Ending 60 61 Note 1. Financing Calculations 62 Cash excess (Deficiency 63 Minimum cash balance 64 Amount to borrow (repayl Borrowing (Repayments) Rounded to 65 increment of $1,000 - 1 Question 5. Cash Budget (30 marks) 2 Mountain Sports has acquired 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 foliowing list of assumptions to help in the preparation of the cash budget (note: you will need to use the projected income stotement provided in Question 4 to complete the cash budget): vo 1. Beginning cash balance invested by owners S 55,000 19 Quarter 1 Quarter 2 Quarter 3 Quarter 4 9 2 Sales by quarter (as % of total projected sales) 27% 26% 25% 22% 10 11 3. Type of collections from customers: 12 Cash Sales 42% 13 Credit Sales (accounts receivable) 58% 14 15 cash sales are collected in the quarter of the sale, all credit sales are collected in the quarter after the sale. 16 17 4. Merchandise purchases 18 Merchandise purchases (cost of goods sold) are all paid in the quarter following purchase. (Quarter I purchases are bought in Quarter 1 20 S. Operating expenses 21 All other operating expenses (all expenses except cost of goods sold) are paid on a monthly basis. 23 6. Required investment in equipment paid in cash in the first quarter S 131,000 24 25 7. Quarterly income tax payments paid in cash s 7,000 26 27 8. Minimum cash balance 28,000 28 29 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. 30 31 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 company's bank. 32 22 Mountain Sports Cash Budget For the year ended December 31 33 34 Quarter Mountain Sports Ltd. Income Statement For the Year Ended Dec 31, 2019 Sales Cost of goods sold Gross margin 1,922,140 798,084 1,124,056 Operating expenses: (See notes) Advertising Depreciation 104,000 23,982 Property taxes 37,317 Rent Parts & service expenses Salaries and commissions 117,664 97,062 444,618 Utilities 103,201 Total operating expenses Operating income Interest expenses Income before taxes Income taxes Net income 927,845 196,211 9,000 187,211 46,803 140,409 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 company's bank. Mountain Sports Cash Budget For the year ended December 31 4 Note f Quarter 2 26% $134420 1 27% $139,590 Percent of Sales Estimated Sales 3 25% $129,250 Year Summary 100% $517.000 22% $113,740 Total Remen budget introdu the cash S 55,000 CASH BALANCE, Beginning Collections from customers: Cash Sales 2 Credit Sales 3 CASH AVAILABLE Less: Cash Payments 5 Merchandise purchases (COGS) 6 Sales Commissions 7 Advertising 8 Property Taxes 19 Rent 60 Salaries & Wages 51 Equipment Purchase 52 Income tax installment 53 Total Disbursements 54 Cash Excess (Deficiency) 55 Financing (Note 1) 56 Borrow Repayment of Principal (show as 57 negative) SB Net Financing 59 Cash Balance, Ending 60 61 Note 1. Financing Calculations 62 Cash excess (Deficiency 63 Minimum cash balance 64 Amount to borrow (repayl Borrowing (Repayments) Rounded to 65 increment of $1,000 - 1 Question 5. Cash Budget (30 marks) 2 Mountain Sports has acquired 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 foliowing list of assumptions to help in the preparation of the cash budget (note: you will need to use the projected income stotement provided in Question 4 to complete the cash budget): vo 1. Beginning cash balance invested by owners S 55,000 19 Quarter 1 Quarter 2 Quarter 3 Quarter 4 9 2 Sales by quarter (as % of total projected sales) 27% 26% 25% 22% 10 11 3. Type of collections from customers: 12 Cash Sales 42% 13 Credit Sales (accounts receivable) 58% 14 15 cash sales are collected in the quarter of the sale, all credit sales are collected in the quarter after the sale. 16 17 4. Merchandise purchases 18 Merchandise purchases (cost of goods sold) are all paid in the quarter following purchase. (Quarter I purchases are bought in Quarter 1 20 S. Operating expenses 21 All other operating expenses (all expenses except cost of goods sold) are paid on a monthly basis. 23 6. Required investment in equipment paid in cash in the first quarter S 131,000 24 25 7. Quarterly income tax payments paid in cash s 7,000 26 27 8. Minimum cash balance 28,000 28 29 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. 30 31 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 company's bank. 32 22 Mountain Sports Cash Budget For the year ended December 31 33 34 Quarter Mountain Sports Ltd. Income Statement For the Year Ended Dec 31, 2019 Sales Cost of goods sold Gross margin 1,922,140 798,084 1,124,056 Operating expenses: (See notes) Advertising Depreciation 104,000 23,982 Property taxes 37,317 Rent Parts & service expenses Salaries and commissions 117,664 97,062 444,618 Utilities 103,201 Total operating expenses Operating income Interest expenses Income before taxes Income taxes Net income 927,845 196,211 9,000 187,211 46,803 140,409