Budget Project 2
atodzau1982
TemplateforBudgetProject.xlsScenario & Questions
| Information Given: |
| Read the scenario below and answer the following 3 questions (be sure to scroll down). You will also need to complete the Budget on the "Income Statement & Budget" tab. Scenario: South Shore Medical Clinic is expanding its operations. As you will notice from Year 3 to Year 4, they have increased their revenue and encounted additional expenses. In addition, they have rented a new office at the end of the year so their rent expense is going to increase (they will now have two offices). In addition, they have added 2 additional staff members to payroll. Using the Income Statement, prepare a budget that takes these changes into account for the upcoming year. |
| Questions: |
| 1. Using the Balance Sheet, calculate the current ratio. Comment on whether or not the ratio shows financial strength. |
| 2. Using the Income Statement, calculate the operating margin ratio for Year 4. How well does the company measure in terms of operating efficiency? |
| 3. Explain your budget suggestions. Do you think Revenue will increase or decrease? Do you think Expenses will increase or decrease? |
Income Statement & Budget
| Task #1: South Shore Medical Clinic is expanding its operations. As you will notice from Year 3 to Year 4, they have increased their revenue and encounted additional expenses. In addition, they have rented a new office at the end of the year so their rent expense is going to increase (they will now have two offices). In addition, they have added 2 additional staff members to payroll. Using the Income Statement below, prepare a budget that takes these changes into account for the upcoming year. Suggest the budget amounts for Year 5 in the column below. | |||||
| South Shore Medical Clinic | |||||
| Income Statement | |||||
| For the year ending December 31, 20X4 | |||||
| ACTUAL | BUDGET | ||||
| Revenues: | |||||
| Service Fee Revenue | $ 160,000 | ||||
| Total Revenues | |||||
| Expenses: | |||||
| Advertising Expense | $ 20,000 | ||||
| Shipping Expense | $ 12,000 | ||||
| Salaries Expense | $ 80,000 | ||||
| Rent Expense | $ 32,000 | ||||
| Utilities Expense | $ 5,200 | ||||
| Total Expenses | |||||
| Income: | |||||
| Net Income | $ 10,800 | ||||
| Operating Margin: |
Balance Sheet
| South Shore Medical Clinic | ||||
| Balance Sheet | ||||
| December 31, 20X4 | ||||
| ASSETS | LIABILITIES & NET WORTH | |||
| Current Assets | Current Liabilities | |||
| Cash | $ 30,000 | Accounts Payable | $ 32,200 | |
| Accounts Receivable | $ 60,000 | Current Portion - Long Term Debt | $ 65,000 | |
| Supplies | $ 10,000 | Total Current Liabilities | $ 97,200 | |
| Inventory | $ 45,000 | |||
| Total Current Assets | $ 145,000 | Non-current Liabilities | ||
| Long Term Debt, net of Current Portion | $ 210,000 | |||
| Non-current Assets | Total Non-Current Liabilities | $ 210,000 | ||
| Equipment | $ 193,000 | |||
| Building | $ 200,000 | NET WORTH | ||
| Total Non-current Assets | $ 393,000 | Owner's Equity | $ 230,800 | |
| TOTAL ASSETS | $ 538,000 | TOTAL LIABILITIES & NET WORTH | $ 538,000 | |
| Current Ratio: |
Trial Balance
| South Shore Medical Clinic | ||
| Trial Balance | ||
| December 31, 20X4 | ||
| Debit | Credit | |
| Cash | $ 30,000 | |
| Accounts Receivable | 60,000 | |
| Supplies | 10,000 | |
| Inventory | 45,000 | |
| Equipment | 193,000 | |
| Building | 200,000 | |
| Accounts Payable | $ 32,200 | |
| Current Portion - Long Term Debt | 65,000 | |
| Long Term Debt, net of Current Portion | 210,000 | |
| Owner's Equity | 220,000 | |
| Service Fee Revenue | 160,000 | |
| Advertising Expense | 20,000 | |
| Shipping Expense | 12,000 | |
| Salaries Expense | 80,000 | |
| Rent Expense | 32,000 | |
| Utilities Expense | 5,200 | |
| Totals | $ 687,200 | $ 687,200 |
