Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 5 - Cash Budget (20 marks] Mountain Sports has aquired an open line of credit up to a maximum of $350,000. It will be

image text in transcribedimage text in transcribedimage text in transcribed

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed
Question 5 - Cash Budget (20 marks] Mountain Sports has aquired 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 following list of assumptions to help in the preparation of the cash budget (note: you will need to use the projected income statement provided in Question 4 to complete the cash budget): 1. Beginning cash balance in vested by owners 53,000 Quarter 1 Quarter 2 Quarter 3 Quarter 4 2. Sales by quarter (as % of total projected sales) 25% 25% 27% 23% 3. Type of collections from customers: Cash Sales 39% Credit Sales (accounts eceivable) 61%Cash sales are collected in the quarter of the sale, all credit sales are collected in the quarter after the sale. 4. Merchandise purchases Merchandise purchases (cost of goods sold) are all paid in the quarter following purchase. (Quarter 1 purchases are bought in Quarter 1 but paid for in quarter 2). 5. Operating expenses All other operating expenses (all expenses except cost of goods sold) are paid on a monthly basis. 6. Required investment in equipment paid in cash in the first quarter 135,000 7. Quarterly income tax payments paid in cash 7,000 8. Minimum cash balance 26,000 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 beRequired: 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 Quarter Year 1 2 4 SummaryNote 1: Financing Calculations Cash excess [Deficiency) Minimum cash balance Amount to borrow (repay) Borrowing (Repayments) Rounded to increment of $1,000

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

Introduction to Managerial Accounting

Authors: Peter C. Brewer, Ray H Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan

4th Canadian edition

978-1259103261

More Books

Students also viewed these Accounting questions