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10/30/2015

TheAceStudent:Assignment3|CompleteSolution

Assignment3|CompleteSolution
Assignment3|CompleteSolution
CaseStudy3
NathanFarmer,chieffinancialofficerofWangApplianceStore,isresponsibleforthecompanys
budgetingprocess.FarmersstaffispreparingtheWangcashbudgetfor2014.Akeyinputtothe
budgetingprocessislastyearsstatementofcashflows,whichfollows(amountsinthousands):
WangApplianceStore
StatementofCashFlows
2013
(inthousands)

CashFlowsfromOperatingActivities
Collectionsfromcustomers$51,000
InterestReceived500
Purchaseofinventory(36,000)
Operatingexpenses(10,200)
Netcashprovidedbyoperatingactivities5,300

CashFlowsfromInvestingActivities
Purchaseofequipment(3,500)
Purchaseofinvestments(500)
Saleofinvestments1,000
Netcashusedforinvestingactivities(3,000)

CashFlowsfromFinancingActivities
Paymentoflongtermdebt(400)
IssuanceofStock2,000
Paymentofcashdividends(500)
Netcashprovidedbyfinancingactivities1,100

Cash
Increase(decrease)inCash3,400
Cash,beginningofyear2,900
Cash,endofyear6,300
Requirements
1.PreparetheWangcashbudgetfor2014.Datethebudgetsimply2014anddenotethebeginning
andendingcashbalancesasbeginningandending.Assumethecompanyexpects2014tobe
thesameas2013,butwiththefollowingchanges:
a.In2014,thecompanyexpectsa20%increaseincollectionsfromcustomersanda30%increase
inpurchasesofinventory.
b.Therewillbenosalesofinvestmentsin2014.
c.Wangdoesnotplantoissuestockin2014.
d.Wangplanstoendtheyearwithacashbalanceof$5,550.
Assignment3|CompleteSolution

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