Wk5_Carter_homework.docx

# Wk5_Carter_homework.docx - BUSN 5200 Homework Assignment...

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Unformatted text preview: BUSN 5200 Homework Assignment for Week 5: For Week 5, please turn in the answers to the following questions: Question 1. Prepare a budget for this year for the Administrative Department at Tom’s Toyota Company based on the following information: Salaries Stationary Telephone Electricity Office Rent Depreciation Total: Last Year Forecasting Assumption Budget for this Year \$75,000 \$ 900 \$ 2,000 \$ 3,000 \$12,000 \$ 4,000 \$96,900 2% increase 1% decrease 3% increase 2.5% increase 2% increase no change \$76,500 \$891 \$2,060 \$3,075 \$12,240 \$4,000 \$98,766 Question 2. Define a “Static Budget.” A static budget is a budget prepared for one level of activity. Question 3. Define a “Flexible Budget.” A flexible budget is several static budgets covering a range of activity within which the organization may operate. Question 4. Define the term “Zero-based Budgeting.” The normal approach to budgeting is to use historical figures and adjust these for anticipated future events. Zero-based budgeting sets the initial figures for each activity to zero. To receive funding from the budgeting process, each activity must be justified in terms of its continued usefulness and the resources needed for that activity. Question 5. Define “Period Budgets.” Budgets are usually developed for a specified period of time. Short-range budgets cover a month, a quarter or a year. Question 6. Define “Rolling Budgets.” Rolling budgets are continually updated by periodically adding a new incremental time period and dropping the period just completed. Question 7. Webster’s Discount Appliances expects sales of \$5,000, \$5,000, and \$10,000 during April, May, and June (big sale in June). To build business, Webster let’s all customers buy on credit, and all do so. In the past, 15% of Webster’s* sales have been collected during the month of sale, 70% are collected the following month, and 10% the month after that. If this trend continues, what will be Webster’s total cash collections in the month of June? Sales Cash Collections In month of sale (15%) 1st month after sale (70%) 2nd month after sale (10%) Total cash collection April \$5,000 May \$5,000 June \$10,000 \$750 \$750 \$1,500 \$3,500 \$3,500 \$500 \$5,500 In June, Webster’s total cash collections will be \$5,500 Question 8. Little Louie’s expects to have \$100 in cash on hand at the beginning of June, and the company's target cash balance is \$100. Net cash flow for June is minus \$300. Assuming that Little Louie’s borrows to meet short-term cash needs and pays back as soon as surplus cash is available, what will be the company's ending cash balance after financing at the end of June? Beginning Cash \$100 Net cash flow (receipts less disbursements) (\$300) = Ending cash before financing (\$200) Minimum cash balance desired \$100 Required financing \$300 End cash balance after financing \$100 The company’s ending cash balance in June, after financing, will be \$100. Question 9. Ma &amp; Pa Kettle’s Chili Company has begun selling a new chili recipe and they want you to help them with next year’s budgeted financial statements. Using the worksheet below, complete Ma &amp; Pa’s forecast and answer the questions which follow. Assumptions: To begin with, Ma &amp; Pa are sure sales will grow 50% next year. Assume that is true. Then assume that COGS, Current Assets, and Current Liabilities all vary directly with Sales (that means if sales grows a certain percentage, then the account in question will grow by that same percentage). Assume that fixed expenses will remain unchanged and that \$1,000 worth of new Fixed Assets will be obtained next year. Lastly, the current dividend policy will be continued next year. Ma &amp; Pa Kettle Chili Company, Inc. Financial Forecast This year Sales COGS Gross Profit Fixed Expenses Before-Tax Profit Tax @ 33.3333% Net Profit Dividends \$20,000 5,000 15,000 3,000 12,000 4,000 \$8,000 \$0 Estimated for next year \$30,000 \$7,500 \$22,500 \$3,000 \$19,500 \$6,500 \$13,000 \$0 Current Assets Net Fixed Assets Total Assets \$25,000 15,000 \$40,000 \$37,500 \$16,000 \$53,500 Current Liabilities Long-term debt Common Stock Retained Earnings Total Liabs &amp; Eq \$17,000 3,000 7,000 13,000 \$40,000 \$25,000 \$3,000 \$7,000 \$13,000 \$48,500 Amount need to balance the balance sheet (Projected total assets minus projected total liabilities &amp; equity *) \$5,000 * If this number is positive it means Ma &amp; Pa need additional external funding to finance their projected asset growth. If this number is negative it means Ma &amp; Pa have programmed too much financing for the amount of assets they project. ...
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• Summer '16
• Balance Sheet, Generally Accepted Accounting Principles, cash balance, total cash collections

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