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Answer & Explanation:ACCT504 Case Study 3
(Learning Objective 5: Construct and
use a cash budget) Nathan Farmer, chief financial officer of Wang Appliance
Store, is responsible for the company’s budgeting process. Farmer’s staff is
preparing the Wang cash budget for 2014. A key input to the budgeting process
is last year’s statement of cash flows, which follows (amounts in thousands):
Wang Appliance Store
Statement of Cash Flows
2013
(in
thousands)
Cash Flows from Operating Activities
Collections from customers
$51,000
Interest Received
500
Purchase of inventory
(36,000)
Operating expenses
(10,200)
Net
cash provided by operating activities 5,300
Cash Flows from Investing Activities
Purchase
of equipment
(3,500)
Purchase
of investments (500)
Sale
of investments
1,000
Net
cash used for investing activities (3,000 )
Cash Flows from Financing Activities
Payment
of long term debt
(400)
Issuance
of Stock
2,000
Payment
of cash dividends
(500)
Net
cash provided by financing activities 1,100
Cash
Increase (decrease) in Cash 3,400
Cash, beginning of year 2,900
Cash, end of year
6,300
▸
Requirements
1.
Prepare the Wang cash budget for 2014. Date the budget simply “2014” and
denote the beginning and ending cash balances as “beginning” and “ending.”
Assume the company expects 2014 to be the same as 2013, but with the
following changes: a. In
2014, the company expects a 20% increase in collections from customers
and a 30% increase in purchases of inventory. b.
There will be no sales of investments in 2014. c.
Wang does not plan to issue stock in 2014. d.
Wang plans to end the year with a cash balance of $5,550.
PLEASE USE THE FILE BELOW TO ANSWER THE QUESTION IF MY BID IS ACCEPTEDcopy_of_acct504_case_study_3_cash_budget_template_1.xlsx
copy_of_acct504_case_study_3_cash_budget_template_1.xlsx
Unformatted Attachment Preview
CASE STUDY 3—Cash Budget Template
Wang Appliance Store
Cash Budget
For 2014
Month
Cash balance
Add: Receipts
Collections from customers
Receipt of Interest
Total Available Cash
0
Budgeted Cash Payments
Less: Disbursements
Purchases of inventory
Operating expenses
Purchase of equipment
Purchase of Investments
Payment of Dividends
Payment of long-term Debt
Total disbursements
Cash available (needed) before new financing
–
Budgeted cash balance ending
Cash available for additional investments or (new financing needed)
–
…
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