ACCT 503 Case Study 3 (Wang Appliance Store)

ACCT 503 Case Study 3 (Wang Appliance Store)

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Construct and use a cash budget) Nathan Farmer, chief financial officer of Wang Appliance Store, is responsible for the company?s budgeting process. Farmer?s staff is preparing the Wang cash budget for 2014. A key input to the budgeting process is last year?s statement of cash flows, which follows (amounts in thousands):

 

                                            Wang Appliance Store

 

                                          Statement of Cash Flows

 

                                                         2013              

 

                                                (in thousands)

 

Cash Flows from Operating Activities

 

Collections from customers                                                   $51,000

 

Interest Received                                                                           500

 

Purchase of inventory                                                             (36,000)

 

Operating expenses                                                                 (10,200)

 

            Net cash provided by operating activities                       5,300

 

Cash Flows from Investing Activities

 

            Purchase of equipment                                                              (3,500)

 

            Purchase of investments                                                              (500)

 

            Sale of investments                                                                      1,000

 

                        Net cash used for investing activities                             (3,000 ) 

 

                      

 

Cash Flows from Financing Activities

 

            Payment of long term debt                                                            (400)

 

            Issuance of Stock                                                                          2,000

 

            Payment of cash dividends                                                             (500)

 

                        Net cash provided by financing activities                          1,000   

 

Cash

 

Increase (decrease) in Cash                                                            3,300

 

Cash, beginning of year                                                         2,900

 

Cash, end of year                                                                            5,900

 

? Requirements

 

1. Prepare the Wang cash budget for 2014. Date the budget simply ?2014? and denote the beginning and ending cash balances as ?beginning? and ?ending.? Assume the company expects 2014 to be the same as 2013, but with the following changes:

 

a. In 2014, the company expects a 20% increase in collections from customers and a 30% increase in purchases of inventory.

 

b. There will be no sales of investments in 2014.

 

c. Wang does not plan to issue stock in 2014.

 

d. Wang plans to end the year with a cash balance of $5,550.

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