ACCT504 Case Study 3
(Learning Objective 5: 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
Cash Flows from Operating Activities
Collections from customers
Purchase of inventory
cash provided by operating activities 5,300
Cash Flows from Investing Activities
of investments (500)
cash used for investing activities (3,000 )
Cash Flows from Financing Activities
of long term debt
of cash dividends
cash provided by financing activities 1,100
Increase (decrease) in Cash 3,400
Cash, beginning of year 2,900
Cash, end of year
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
- a. In
2014, the company expects a 20% increase in collections from customers
and a 30% increase in purchases of inventory.
There will be no sales of investments in 2014.
Wang does not plan to issue stock in 2014.
Wang plans to end the year with a cash balance of $5,550.