Solved: Akron Medical Supply has applied for a loan First

National
Akron Medical Supply has applied for a loan First National

Akron Medical Supply has applied for a loan. First National Bank has requested a budgeted
balance sheet at April 30 and a combined cash budget for April. As Akron Medical Supply’s
controller, you have assembled the following information:
a. March 31 equipment balance, $ 52,100; accumulated depreciation, $ 41,500
b. April capital expenditures of $ 42,700 budgeted for cash purchase of equipment
c. April depreciation expense, $ 300
d. Cost of goods sold, 40% of sales
e. Other April operating expenses, including income tax, total $ 14,000, 35% of which will be
paid in cash and the remainder accrued at April 30
f. March 31 owners’ equity, $ 93,200
g. March 31 cash balance, $ 40,500
h. April budgeted sales, $ 87,000, 65% of which is for cash. Of the remaining 35%, half will be
collected in April and half in May.
i. April cash collections on March sales, $ 29,500
j. April cash payments of March 31 liabilities incurred for March purchases of inventory, $
17,000
k. March 31 inventory balance, $ 29,600
l. April purchases of inventory, $ 10,400 for cash and $ 36,700 on credit. Half of the credit
purchases will be paid in April and half in May

Requirements
1. Prepare the budgeted balance sheet for Akron Medical Supply at April 30. Show separate
computations for cash, inventory, and stockholders’ equity balances.
2. Prepare the combined cash budget for April.
3. Suppose Akron Medical Supply has become aware of more efficient (and more ex-pensive)
equipment than it budgeted for purchase in April. What is the total amount of cash available for
equipment purchases in April, before financing, if the minimum desired ending cash balance is $
13,000? (For this requirement, disregard the $ 42,700 initially budgeted for equipment
purchases.)
4. Before granting a loan to Akron Medical Supply, First National Bank asks for a sensitivity
analysis assuming that April sales are only $ 58,000 rather than the $ 87,000 originally
budgeted. (While the cost of goods sold will change, assume that purchases, depreciation, and
the other operating expenses will remain the same as in the earlier requirements.)
a. Prepare a revised budgeted balance sheet for the company, showing separate computations
for cash, inventory, and stockholders’ equity balances.
b. Suppose Akron Medical Supply has a minimum desired cash balance of $ 17,000. Will the
company need to borrow cash in April?
c. In this sensitivity analysis, sales declined by 33 1/ 3% ($ 29,000/$ 87,000). Is the decline in
expenses and income more or less than 33 1/ 3%? Explain.

Reach out to freelance2040@yahoo.com for enquiry.

 Akron Medical Supply has applied for a loan First National

ANSWER
https://solvedquest.com/akron-medical-supply-has-applied-for-a-loan-first-national/

Reach out to freelance2040@yahoo.com for enquiry.

Powered by TCPDF (www.tcpdf.org)