Question: Jane and Harvey Wentland have decided to open a retail

Jane and Harvey Wentland have decided to open a retail athletic supply store, Fitness Outfitters Inc. They will stock clothing, shoes, and supplies used in running, swimming, bicycling, weight lifting, and other exercise and athletic activities. During their first year of operations, 2011, they expect the following results. (Subsequent years are expected to be more successful.)
Sales revenue .............. $ 629,000
Less: Cost of goods sold ........... (291,000)
Gross margin ............... $ 338,000
Less: Operating expenses ........... (355,000)
Net loss ................. $ (17,000)
By the end of 2011, Fitness Outfitters needs to have a cash balance of $5,000 and is expected to have the following partial balance sheet:

1. Prepare as much of the statement of cash flows for 2011 as you can. Use the direct method to determine cash flows from operations.
2. In the statement that you prepared for requirement 1, by how much does the prospective cash balance exceed or fall short of the desired cash balance? If a shortfall occurs, where would you suggest that Jane and Harvey seek additional cash?
3. Does the preparation of a prospective statement of cash flows seem worthwhile for an ongoing business? Why?

Sale on SolutionInn
  • CreatedSeptember 22, 2015
  • Files Included
Post your question