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?

 

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