– On the basis of financial considerations only, what should Magnuson do?

Recommendation –

Explanation for recommendation –

What happens under alternative 1 (use numbers to support)

What happens under alternative 2 (use numbers to support)

What effect does each have on principal repayments and interest?

Requirement 3 – What nonfinancial factors should Magnuson consider?

Consideration 1

Why

Consideration 2

Why

(Feel free to add more)

Requirement 1 information (completed for you)

Cash Budget—Alternative 1: Weave place mats in cotton using existing loom.

ANNE MAGNUSON, WEAVER
Cash Budget
For the Four Months Ending December 31, 2014
Beginning cash balance	$ 25
Cash receipts from the local craft shop [25 sets × {$20/set – (10% × $20/set)}]	450
Cash available	475
Cash payments:
Accounts payable balance August 31, 2014	74
Ending cash balance	$ 401

Cash Budget—Alternative 2: Weave place mats in linen using new loom.

ANNE MAGNUSON, WEAVER
Cash Budget
For the Four Months Ending December 31, 2014
Beginning cash balance	$ 25
Cash receipts from the local craft shop [15 sets × {$50/set – (10% × $50/set)}]	675
Cash available	700
Cash payments:
Accounts payable balance August 31, 2014	74
Purchases of linen (15 sets × $18/set)	270
Purchase of new loom	1,000
Interest expense ($1,000 × 18% × 4/12)	60
Total cash payments	1,404
Ending cash balance before financing	(704)
Financing:
Borrowing	1,000
Principal repayments	(200)
Total effects of financing	800
Ending cash balance	$ 96

Decision Case 22-2, cont.

Requirement 1, cont.

Budgeted Income Statement—Alternative 1: Weave place mats in cotton using existing loom.

ANNE MAGNUSON, WEAVER
Budgeted Income Statement
For the Four Months Ending December 31, 2014
Sales Revenue (25 sets × $20/set)		$ 500
Cost of Goods Sold (25 sets × $7/set)		175
Gross Profit		325
Operating Expenses
Sales Commission (10% of sales)	$ 50
Depreciation Expense (4 months × $10/month)	40
Total Operating Expenses		90
Net Income		$ 235

Budgeted Income Statement—Alternative 2: Weave place mats in linen using new loom.

ANNE MAGNUSON, WEAVER
Budgeted Income Statement
For the Four Months Ending December 31, 2014
Sales Revenue (15 sets × $50/set)		$ 750
Cost of Goods Sold (15 sets × $18/set)		270
Gross Profit		480
Operating Expenses
Sales Commission (10% of sales)	$ 75
Depreciation Expense [($10/mth. × 4 mths.) + ($20/mth. × 4 mths.)]	120
Total Operating Expenses		195
Operating Income		285
Interest Expense ($1,000 × 18% × 4/12)		60
Net Income		$ 225

Decision Case 22-2, cont.

Requirement 1, cont.

Budgeted Balance Sheet—Alternative 1: Weave place mats in cotton using existing loom.

ANNE MAGNUSON, WEAVER
Budgeted Balance Sheet
December 31, 2014
Assets
Current Assets:
Cash		$ 401
Property, Plant, and Equipment:
Loom	500
Less: Accumulated Depreciation ($240 + $40)	(280)	220
Total Assets		$ 621
Liabilities		$ 0
Stockholders’ Equity
Stockholders’ equity ($386 + $235)		621
Total Liabilities and Stockholders’ Equity		$ 621

Budgeted Balance Sheet—Alternative 2: Weave place mats in linen using new loom.

ANNE MAGNUSON, WEAVER
Budgeted Balance Sheet
December 31, 2014
Assets
Current Assets:
Cash	$ 96
Inventory of Cotton	175
Total Current Assets		$ 271
Property, Plant, and Equipment:
Looms ($500 + $1,000)	1,500
Less: Accumulated Depreciation ($240 + $120)	(360)	1,140
Total Assets		$ 1,411
Liabilities
Current Liabilities:
Note Payable ($1,000 – $200)		$ 800
Stockholders’ Equity
Stockholders’ equity ($386 + $225)		611
Total Liabilities and Stockholders’ Equity		$ 1,411

Ethical Issue 22-1

Requirement 1

Ethical issue 1 – (Discuss issue and why it is an issue)

Ethical issue 2 – (Discuss issue and why it is an issue)

Ethical issue 3 – (Discuss issue and why it is an issue)

Requirement 2

Option 1 –

Option 2 –

Option 3 -

Requirement 3

Possible consequences of each of the options listed in Requirement 2 include the following.

· Discussion option 1 consequences – what might happen, what has Dunn already done, what else might Dunn do?

· Discussion option 2 consequences – what might happen, what has Dunn already done, what else might Dunn do?

· Discussion option 3 consequences– what might happen, what has Dunn already done, what else might Dunn do?

Requirement 4 – What should you do?

Option you recommend -

Why?
 

H: anna Kendall sat down at her desk with way to know the direction in which the division I T anticipation. Hanna, the newly promoted manager of her division at B&T Manufacturing, was ready to begin preparing the budget for the should and a way to determine whether progress the division met its goals. Hanna considered how to begin the process. next year. At the last B&T division managers' She knew she needed to study last year's budget meeting, most of the other managers were grum- bling about the process. No one else seemed to like the task, but Hanna felt differently. She re- membered from her managerial accounting class prepared by the previous manager, compare it to actual results to see which goals had been met, and consider outside influences such as the eco- nomic conditions for B&T's industry. Hanna also wanted to get input from her employees that budgeting can have many benefits. When used appropriately, budgets help managers plan and control activities for their divisions by to ensure the goals set for the division were realistic, obtainable, and a source of motivation. Hanna had seen bud- providing gets used to punish employees when guidance and budget goals were set at an unob- benchmarks tainable level, but she was not that for the budgeting type of manager. Hanna wanted high morale in her division, with period. Hanna considered the budget to be a roadmap everyone working toward the of sorts for her division-a same goals. INO H: anna Kendall sat down at her desk with way to know the direction in which the division I T anticipation. Hanna, the newly promoted manager of her division at B&T Manufacturing, was ready to begin preparing the budget for the should and a way to determine whether progress the division met its goals. Hanna considered how to begin the process. next year. At the last B&T division managers' She knew she needed to study last year's budget meeting, most of the other managers were grum- bling about the process. No one else seemed to like the task, but Hanna felt differently. She re- membered from her managerial accounting class prepared by the previous manager, compare it to actual results to see which goals had been met, and consider outside influences such as the eco- nomic conditions for B&T's industry. Hanna also wanted to get input from her employees that budgeting can have many benefits. When used appropriately, budgets help managers plan and control activities for their divisions by to ensure the goals set for the division were realistic, obtainable, and a source of motivation. Hanna had seen bud- providing gets used to punish employees when guidance and budget goals were set at an unob- benchmarks tainable level, but she was not that for the budgeting type of manager. Hanna wanted high morale in her division, with period. Hanna considered the budget to be a roadmap everyone working toward the of sorts for her division-a same goals. INO H: anna Kendall sat down at her desk with way to know the direction in which the division I T anticipation. Hanna, the newly promoted manager of her division at B&T Manufacturing, was ready to begin preparing the budget for the should and a way to determine whether progress the division met its goals. Hanna considered how to begin the process. next year. At the last B&T division managers' She knew she needed to study last year's budget meeting, most of the other managers were grum- bling about the process. No one else seemed to like the task, but Hanna felt differently. She re- membered from her managerial accounting class prepared by the previous manager, compare it to actual results to see which goals had been met, and consider outside influences such as the eco- nomic conditions for B&T's industry. Hanna also wanted to get input from her employees that budgeting can have many benefits. When used appropriately, budgets help managers plan and control activities for their divisions by to ensure the goals set for the division were realistic, obtainable, and a source of motivation. Hanna had seen bud- providing gets used to punish employees when guidance and budget goals were set at an unob- benchmarks tainable level, but she was not that for the budgeting type of manager. Hanna wanted high morale in her division, with period. Hanna considered the budget to be a roadmap everyone working toward the of sorts for her division-a same goals. INO