Question

Tom Patterson, the chief financial officer, is responsible for Gateway Golf’s cash budget for 2015. The budget will help Patterson determine the amount of long-term borrowing needed to end the year with a cash balance of $135,000. Patterson’s assistants have assembled budget data for 2015, which the computer printed in alphabetical order. Not all the data items reproduced below are used in preparing the cash budget.
(Assumed Data) (In thousands)
Actual cash balance, December 31, 2014............................. $ 145
Budgeted total assets, December 31, 2015............................ 22,677
Budgeted total current assets, December 31, 2015............... 7,576
Budgeted total current liabilities, December 31, 2015........... 4,360
Budgeted total liabilities, December 31, 2015...................... 11,588
Budgeted total stockholders’ equity, December 31, 2015...... 11,089
Collections from customers.................................................. 20,400
Dividend payments .............................................................. 307
Issuance of stock.................................................................. 632
Net income........................................................................... 1,213
Payment of long-term and short-term debt........................... 990
Payment of operating expenses ............................................ 2,849
Payments for inventory items............................................... 14,245
Purchase of property and equipment with cash.................... 1,588

Requirements
1. Construct the cash budget of Gateway Golf, Inc.
2. Compute Gateway Golf’s budgeted current ratio and debt ratio at December 31, 2015.
Based on these ratio values, and on the cash budget, would you lend $95,000 to Gateway Golf? Give the reason for your decision.



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  • CreatedJuly 25, 2014
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