ACCT 504 Case Study 3 - Wang Appliance Store (2015)
Question # 00075393
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Updated on: 06/12/2015 12:22 AM Due on: 06/18/2015
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 1,000
Cash
Increase (decrease) in Cash 3,300
Cash, beginning of year 2,900
Cash, end of year 5,900
? 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:
o a. In 2014, the company expects a 20% increase in collections from customers and a 30% increase in purchases of inventory.
o b. There will be no sales of investments in 2014.
o c. Wang does not plan to issue stock in 2014.
o d. Wang plans to end the year with a cash balance of $5,550.
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) -
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) -
(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 1,000
Cash
Increase (decrease) in Cash 3,300
Cash, beginning of year 2,900
Cash, end of year 5,900
? 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:
o a. In 2014, the company expects a 20% increase in collections from customers and a 30% increase in purchases of inventory.
o b. There will be no sales of investments in 2014.
o c. Wang does not plan to issue stock in 2014.
o d. Wang plans to end the year with a cash balance of $5,550.
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) -
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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Rating:
/5
Solution: ACCT 504 Case Study 3 - Wang Appliance Store (2015)
Solution: ACCT 504 Case Study 3 - Wang Appliance Store (2015)