can someone explain this

check the second image

File Home Insert Page Layout Formulas Data 3 - Calibri BIU Review View Help Search Conditional Formatting - Format as table Cells Editing Cell Styles -111 ' ' A % Number 2 000 Paste Alignment Ideas Clipboard Font Styles E33 D E F Snick's Board Shop Dr. Bolden: 2 Step 1: Enter 3 Assumptions based on 4 Assumptions Information in the sceno Prior year sales 300,000 6 Sales growth each year (percentage) 7 Expense growth each year (percentage) 8 Collections in the year of sale (percentage) 9 Collections in the year following sale (percentage) 10 Payments in the year of purchase (percentage) 11 Payments in the year following purchase (percentage) 12 Advertising expense 13 Depreciation expense 14 Interest expense 15 Wages expense 16 Supplies expense 17 Utilities expense 18 Loan proceeds 19 Annual loan payment 20 Annual equipment purchases 21 Annual equipment sales Dr. Bolden: 22 Year 1 equipment purchase Step 2: Using Information keyed in the Assumptions area, create the Cash Budget by referencing 23 Cost of expected sales (percentage) numbers in the Assumptions area and/or using 24 Required ending inventory (percentage FORMULAS! There should be NO hard keyed 25 Beginning inventory numbers in the Budoet for vears 1-3 97,450 26 Beginning cash in year 1 27 Prior Year 28 Cash Budget 29 Cash Budget Sheet2 Sheet 1 2 3 + 100 Read 4:33 PM Chapter 6 Case Problem 3: SNICK'S BOARD SHOP Snick's Board Shop is contemplating several alternative means of financing their acquisition of $350,000 in new equipment in year 1. One option is to bor- row $300,000 from a local bank. The bank has asked them to produce a 3-year cash budget broken down by year (Year 1, 2, and 3). Sales in the prior year were $300,000 and are expected to increase 3 percent each year. Year 1 begin- ning cash was $97,450 and beginning inventory was $30,000. Purchases are based on an expected cost of sales of 40 percent and a required ending inven- tory of 25 percent of next year's sales. Prior year expenses included advertising expense of $2,500, depreciation expense of $1,000, wages expense of $46,000, supplies expense of $450, and utilities expense of $1,600. All expenses except depreciation are paid in the year in which they are incurred and are expected to increase 8 percent each year. Interest expense is expected to remain constant at $15,000 each year for years 1-3. Collections in the year of sale are expected to File Home Insert Page Layout Formulas Data 3 - Calibri BIU Review View Help Search Conditional Formatting - Format as table Cells Editing Cell Styles -111 ' ' A % Number 2 000 Paste Alignment Ideas Clipboard Font Styles E33 D E F Snick's Board Shop Dr. Bolden: 2 Step 1: Enter 3 Assumptions based on 4 Assumptions Information in the sceno Prior year sales 300,000 6 Sales growth each year (percentage) 7 Expense growth each year (percentage) 8 Collections in the year of sale (percentage) 9 Collections in the year following sale (percentage) 10 Payments in the year of purchase (percentage) 11 Payments in the year following purchase (percentage) 12 Advertising expense 13 Depreciation expense 14 Interest expense 15 Wages expense 16 Supplies expense 17 Utilities expense 18 Loan proceeds 19 Annual loan payment 20 Annual equipment purchases 21 Annual equipment sales Dr. Bolden: 22 Year 1 equipment purchase Step 2: Using Information keyed in the Assumptions area, create the Cash Budget by referencing 23 Cost of expected sales (percentage) numbers in the Assumptions area and/or using 24 Required ending inventory (percentage FORMULAS! There should be NO hard keyed 25 Beginning inventory numbers in the Budoet for vears 1-3 97,450 26 Beginning cash in year 1 27 Prior Year 28 Cash Budget 29 Cash Budget Sheet2 Sheet 1 2 3 + 100 Read 4:33 PM Chapter 6 Case Problem 3: SNICK'S BOARD SHOP Snick's Board Shop is contemplating several alternative means of financing their acquisition of $350,000 in new equipment in year 1. One option is to bor- row $300,000 from a local bank. The bank has asked them to produce a 3-year cash budget broken down by year (Year 1, 2, and 3). Sales in the prior year were $300,000 and are expected to increase 3 percent each year. Year 1 begin- ning cash was $97,450 and beginning inventory was $30,000. Purchases are based on an expected cost of sales of 40 percent and a required ending inven- tory of 25 percent of next year's sales. Prior year expenses included advertising expense of $2,500, depreciation expense of $1,000, wages expense of $46,000, supplies expense of $450, and utilities expense of $1,600. All expenses except depreciation are paid in the year in which they are incurred and are expected to increase 8 percent each year. Interest expense is expected to remain constant at $15,000 each year for years 1-3. Collections in the year of sale are expected to