P1-6 Accounting and Planning Decisions Myrla Rhyman

P1-6 Accounting and Planning Decisions

Myrla Rhyman is planning to start a new business as a systems consultant. She has saved $7,000 to invest in the business. She expects to receive $3,800 each month, on average, from sales to customers. She expects that she will need cash to pay the following items each month, on average: rent, $900; supplies, $500; utilities, $100; other, 4250. She will need to purchase $13,000 of equipment to start the business; in addition, she will need $3,000 to cover initial operating costs. A local bank has agreed to consider a loan to help Myrla start her business and has asked her to develop a plan that describes her expected cash receipts and payments for the first year. The plan should show how much cash she will need for the buisness, how much she will need to borrow, and how she expects to pay back the loan. Monthly payments will be required to pay off the loan and interest. The bank will charge $10 per year in interest for each $100 borrowed until the loan is repaid at the end of the year. Myrla has asked you to prepare a plan for her to submit to the bank.

Required

Prepare a plan for Myrla. Describe any assumptions you make.