Kenneth Austin, chief financial officer of ReMax Wireless, is responsible for the company's budgeting process. Austin's staff
Question:
Kenneth Austin, chief financial officer of ReMax Wireless, is responsible for the company's budgeting process. Austin's staff is preparing the ReMax cash budget for 20X7. A key input to the budgeting process is last year's statement of cash flows, which follows (amount in thousands):
ReMax Wireless
Statement of Cash Flows
20X6
(In thousands)
Cash Flows from Operating Activities
Collections from customers........................................ $ 60,000
Interest received......................................................... 100
Purchases of inventory............................................... (44,000)
Operating expenses.................................................... (13,900)
Net cash provided by operations............................ 2,200
Cash Flows from Investing Activities
Purchases of equipment.............................................. (4,300)
Purchases of investments............................................ (200)
Sales of investments................................................... 400
Net cash used for investing activities...................... (4,100)
Cash Flows from Financing Activities
Payment of long-term debt......................................... (300)
Issuance of stock........................................................ 1,200
Payment of cash dividends......................................... (500)
Net cash provided by financing activities............... 400
Cash
Increase (decrease) in cash..........................................(1,500)
Cash, beginning of year.............................................. 2,700
Cash, end of year....................................................... $ 1,200
Required
1. Prepare the ReMax Wireless cash budget for 20X7. Date the budget simply "20X7" and denote the beginning and ending cash balances as "beginning" and "ending." Assume the company expects 20X7 to be the same as 20X6, but with the following changes:
a. In 20X7, the company expects a 15% increase in collections from customers and a 20% increase in purchases of inventory.
b. There will be no sales of investments in 20X7.
c. ReMax plans to issue no stock in 20X7.
d. ReMax plans to end the year with a cash balance of $2,000 thousand.
Cash BudgetA cash budget is an estimation of the cash flows for a business over a specific period of time. These cash inflows and outflows include revenues collected, expenses paid, and loans receipts and payment. Its primary purpose is to provide the...
Step by Step Answer:
Financial Accounting
ISBN: 978-0135012840
7th edition
Authors: Walter T. Harrison, Charles T. Horngren