Assume that the five owners of Mountain Sports Ltd. decide to collectively invest personal funds into the Canmore expansion (this is a continuation of question 4). Mountain Sports will require an open line of credit up to a maximum of $350,000. It will be necessary to convince the bank manager of this new Canmore branch ability to repay its line credit plus interest within a year.
 

Management has provided the following list of assumptions to help in the preparation of the cash budget (note: you will need to use the projected income statement provided in Question 4 to complete the cash budget):
1. Beginning cash balance invested by owners			$ 59,000
		Quarter 1	Quarter 2	Quarter 3	Quarter 4
2. Sales by quarter (as % of total projected sales)		24%	27%	28%	21%
3. Type of collections from customers
Cash Sales	35%
Credit Sales (accounts receivable)	65%
Cash sales are collected in the quarter of the sale, all credit sales are collected in the quarter after the sale.
4. Merchandise purchases
Merchandise purchases (cost of goods sold) are all paid in the quarter following purchase. (Quarter 1 purchases are bought in Quarter 1 but paid for in quarter 2).
5. Operating expenses
All other operating expenses (all expenses except cost of goods sold) are paid on a monthly basis.
6. Required investment in equipment paid in cash in the first quarter			$ 138,000
7. Quarterly income tax payments paid in cash			$ 7,000
8. Minimum cash balance			$ 21,000
9. Borrowing and Repayments
Any borrowing will take place on the first day of the quarter and any repayments are paid at the end of the quarter. All borrowing and payments are made in increments of $1,000. Interest on borrowing can be ignored.

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Required:Prepare a cash budget for the first year of operation in Canmore by quarter and in total. Show clearly on your budget the quarter(s) in which borrowing will be needed and the quarter(s) in which repayments can be made, as requested by the company's bank. Mountain Sports Cash Budget For the year ended December 31st Quarter Year 1 3 4 Summary Percent of Sales 24% 27% 28% 21% 100% Estimated Sales $120,960 $136,080 $141,120 $105,840 $504,000 CASH BALANCE, Beginning $ 59,000 Collections from customers: Cash Sales Credit Sales CASH AVAILABLE Less: Cash Payments Merchandise purchases (COGS) Sales Commissions Advertising Property Taxes Rent Salaries & Wages Equipment Purchase Income tax Installment Total Disbursements Cash Excess (Deficiency) Financing (Note 1) Borrow Repayment of Principal (show as negative) Net Financing Cash Balance, Ending Required:Prepare a cash budget for the first year of operation in Canmore by quarter and in total. Show clearly on your budget the quarter(s) in which borrowing will be needed and the quarter(s) in which repayments can be made, as requested by the company's bank. Mountain Sports Cash Budget For the year ended December 31st Quarter Year 1 3 4 Summary Percent of Sales 24% 27% 28% 21% 100% Estimated Sales $120,960 $136,080 $141,120 $105,840 $504,000 CASH BALANCE, Beginning $ 59,000 Collections from customers: Cash Sales Credit Sales CASH AVAILABLE Less: Cash Payments Merchandise purchases (COGS) Sales Commissions Advertising Property Taxes Rent Salaries & Wages Equipment Purchase Income tax Installment Total Disbursements Cash Excess (Deficiency) Financing (Note 1) Borrow Repayment of Principal (show as negative) Net Financing Cash Balance, Ending