Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Q3. Fill in the blanks of Table 1: Monthly Cash Outflows and Table 2: Monthly Cash Inflows . Then, use the information to generate Table3:Pro-Forma

Q3. Fill in the blanks of Table 1: Monthly Cash Outflows andTable 2: Monthly Cash Inflows. Then, use the information to generate Table3:Pro-Forma Cash Flow Budgetand answer the following questions.(10 points in total)

Table 1: AgBiz Estimated Monthly Cash Outflows (Jan.Apr.)

Item

Jan

Feb

Mar

Apr

Sales

$8,000

$7,000

Purchases($)

$1,500

$4,000

$5,000

Payment of Account Payable

$7,000

$4,000

Payment of Overhead

$1,000

$1,000

$1,000

$1,000

Total Cash Outflows

Inventory Levels

$5,000

Assumptions:

1. The inventory turnover rate is 12.

2. Inventory is equal to current month's purchases + previous month's purchases

3. Cost of goods sold=25% of sales

4. Account payable turnover ratio=6.

Table 2: AgBiz Estimated Cash Inflows (Jan. Apr.)

Item

Jan

Feb

Mar

Apr

Sales

$8,000

$7,000

Cash Sales($)

$1,750

Account Receivable

(1 month old)

$4,000

Account Receivable

(3 month old)

$2,000

$2,000

$1,000

Total Cash Inflows

Assumptions:

1. Sales are 1/4cash, and3/4 credits.

2. Account Receivable ratio is 4.

Table 3: Pro-Forma Cash Flow Budget

Item

Jan

Feb

Mar

Apr

Initial Cash Balance

$1,000

$1,000

$1,000

$1,000

Cash Inflow

Total cash available

Cash Outflow

Net Cash

Need Borrowings

End Cash Balance

$1,000

$1,000

$1,000

Cumulative borrowings

(Hint: These three tables are consistent. You are able to get cash inflow from table 2 and cash outflow from table 3)

Based on the above Pro-Forma Cash Flow Budget, answer the following two questions:

(1) Does the business need to borrow money? If yes, how much money needs to be borrowed?

(2) When does the money need to be borrowed? When will the loan be repaid?

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

Advanced Principles Of Auditing

Authors: Hugo Romero

1st Edition

1632409372, 978-1632409379

More Books

Students also viewed these Accounting questions

Question

Explain the pages in white the expert taxes

Answered: 1 week ago