Please answer the following discussion using template provided.
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ACC 202 Module Four Written Assignment Template
Decision Case 22-2
Using the following given information from requirement 1 (see below), answer requirements 2 and 3.
Requirement 2 – On the basis of financial considerations only, what should Magnuson do?
Recommendation –
Explanation for recommendation –
What happens under alternative 1 (use numbers to support)
What happens under alternative 2 (use numbers to support)
What effect does each have on principal repayments and interest?
Requirement 3 – What nonfinancial factors should Magnuson consider?
Consideration 1
Why
Consideration 2
Why
(Feel free to add more)
Requirement 1 information (completed for you)
Cash Budget—Alternative 1: Weave place mats in cotton using existing loom.
ANNE MAGNUSON, WEAVER | |
Cash Budget | |
For the Four Months Ending December 31, 2014 | |
|
|
Beginning cash balance | $ 25 |
Cash receipts from the local craft shop [25 sets × {$20/set – (10% × $20/set)}] | 450 |
Cash available | 475 |
Cash payments: |
|
Accounts payable balance August 31, 2014 | 74 |
Ending cash balance | $ 401 |
Cash Budget—Alternative 2: Weave place mats in linen using new loom.
ANNE MAGNUSON, WEAVER | |
Cash Budget | |
For the Four Months Ending December 31, 2014 | |
|
|
Beginning cash balance | $ 25 |
Cash receipts from the local craft shop [15 sets × {$50/set – (10% × $50/set)}] | 675 |
Cash available | 700 |
Cash payments: |
|
Accounts payable balance August 31, 2014 | 74 |
Purchases of linen (15 sets × $18/set) | 270 |
Purchase of new loom | 1,000 |
Interest expense ($1,000 × 18% × 4/12) | 60 |
Total cash payments | 1,404 |
Ending cash balance before financing | (704) |
Financing: |
|
Borrowing | 1,000 |
Principal repayments | (200) |
Total effects of financing | 800 |
Ending cash balance | $ 96 |
Decision Case 22-2, cont.
Requirement 1, cont.
Budgeted Income Statement—Alternative 1: Weave place mats in cotton using existing loom.
ANNE MAGNUSON, WEAVER | ||
Budgeted Income Statement | ||
For the Four Months Ending December 31, 2014 | ||
|
|
|
Sales Revenue (25 sets × $20/set) |
| $ 500 |
Cost of Goods Sold (25 sets × $7/set) |
| 175 |
Gross Profit |
| 325 |
Operating Expenses |
|
|
Sales Commission (10% of sales) | $ 50 |
|
Depreciation Expense (4 months × $10/month) | 40 |
|
Total Operating Expenses |
| 90 |
Net Income |
| $ 235 |
|
|
|
Budgeted Income Statement—Alternative 2: Weave place mats in linen using new loom.
ANNE MAGNUSON, WEAVER | ||
Budgeted Income Statement | ||
For the Four Months Ending December 31, 2014 | ||
|
|
|
Sales Revenue (15 sets × $50/set) |
| $ 750 |
Cost of Goods Sold (15 sets × $18/set) |
| 270 |
Gross Profit |
| 480 |
Operating Expenses |
|
|
Sales Commission (10% of sales) | $ 75 |
|
Depreciation Expense [($10/mth. × 4 mths.) + ($20/mth. × 4 mths.)] | 120 |
|
Total Operating Expenses |
| 195 |
Operating Income |
| 285 |
Interest Expense ($1,000 × 18% × 4/12) |
| 60 |
Net Income |
| $ 225 |
|
|
|
Decision Case 22-2, cont.
Requirement 1, cont.
Budgeted Balance Sheet—Alternative 1: Weave place mats in cotton using existing loom.
ANNE MAGNUSON, WEAVER | ||
Budgeted Balance Sheet | ||
December 31, 2014 | ||
Assets |
|
|
Current Assets: |
|
|
Cash |
| $ 401 |
Property, Plant, and Equipment: |
|
|
Loom | 500 |
|
Less: Accumulated Depreciation ($240 + $40) | (280) | 220 |
Total Assets |
| $ 621 |
|
|
|
Liabilities |
| $ 0 |
|
|
|
Stockholders’ Equity |
|
|
Stockholders’ equity ($386 + $235) |
| 621 |
Total Liabilities and Stockholders’ Equity |
| $ 621 |
|
|
|
Budgeted Balance Sheet—Alternative 2: Weave place mats in linen using new loom.
ANNE MAGNUSON, WEAVER | ||
Budgeted Balance Sheet | ||
December 31, 2014 | ||
Assets |
|
|
Current Assets: |
|
|
Cash | $ 96 |
|
Inventory of Cotton | 175 |
|
Total Current Assets |
| $ 271 |
Property, Plant, and Equipment: |
|
|
Looms ($500 + $1,000) | 1,500 |
|
Less: Accumulated Depreciation ($240 + $120) | (360) | 1,140 |
Total Assets |
| $ 1,411 |
|
|
|
Liabilities |
|
|
Current Liabilities: |
|
|
Note Payable ($1,000 – $200) |
| $ 800 |
|
|
|
Stockholders’ Equity |
|
|
Stockholders’ equity ($386 + $225) |
| 611 |
Total Liabilities and Stockholders’ Equity |
| $ 1,411 |
|
|
|
Ethical Issue 22-1
Requirement 1
Ethical issue 1 – (Discuss issue and why it is an issue)
Ethical issue 2 – (Discuss issue and why it is an issue)
Ethical issue 3 – (Discuss issue and why it is an issue)
Requirement 2
Option 1 –
Option 2 –
Option 3 -
Requirement 3
Possible consequences of each of the options listed in Requirement 2 include the following.
Discussion option 1 consequences – what might happen, what has Dunn already done, what else might Dunn do?
Discussion option 2 consequences – what might happen, what has Dunn already done, what else might Dunn do?
Discussion option 3 consequences– what might happen, what has Dunn already done, what else might Dunn do?
Requirement 4 – What should you do?
Option you recommend -
Why?
- 9 years ago
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