ACC 202 Module Four Written Assignment Template
Decision Case 22-2
Using the following given information from requirement 1 (see below), answer requirements 2 and 3.
Requirement 2 – On the basis of financial considerations only, what should Magnuson do?
Recommendation –
Explanation for recommendation –
What happens under alternative 1 (use numbers to support)
What happens under alternative 2 (use numbers to support)
What effect does each have on principal repayments and interest?
Requirement 3 – What nonfinancial factors should Magnuson consider?
Consideration 1
Why
Consideration 2
Why
(Feel free to add more)
Requirement 1 information (completed for you)
Cash Budget—Alternative 1: Weave place mats in cotton using existing loom.
ANNE MAGNUSON, WEAVER |
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Cash Budget |
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For the Four Months Ending December 31, 2014 |
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Beginning cash balance |
$ 25 |
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Cash receipts from the local craft shop [25 sets × {$20/set – (10% × $20/set)}] |
450 |
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Cash available |
475 |
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Cash payments: |
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Accounts payable balance August 31, 2014 |
74 |
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Ending cash balance |
$ 401 |
Cash Budget—Alternative 2: Weave place mats in linen using new loom.
ANNE MAGNUSON, WEAVER |
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Cash Budget |
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For the Four Months Ending December 31, 2014 |
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Beginning cash balance |
$ 25 |
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Cash receipts from the local craft shop [15 sets × {$50/set – (10% × $50/set)}] |
675 |
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Cash available |
700 |
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Cash payments: |
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Accounts payable balance August 31, 2014 |
74 |
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Purchases of linen (15 sets × $18/set) |
270 |
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Purchase of new loom |
1,000 |
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Interest expense ($1,000 × 18% × 4/12) |
60 |
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Total cash payments |
1,404 |
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Ending cash balance before financing |
(704) |
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Financing: |
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Borrowing |
1,000 |
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Principal repayments |
(200) |
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Total effects of financing |
800 |
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Ending cash balance |
$ 96 |
Decision Case 22-2, cont.
Requirement 1, cont.
Budgeted Income Statement—Alternative 1: Weave place mats in cotton using existing loom.
ANNE MAGNUSON, WEAVER |
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Budgeted Income Statement |
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For the Four Months Ending December 31, 2014 |
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Sales Revenue (25 sets × $20/set) |
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$ 500 |
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Cost of Goods Sold (25 sets × $7/set) |
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175 |
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Gross Profit |
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325 |
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Operating Expenses |
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Sales Commission (10% of sales) |
$ 50 |
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Depreciation Expense (4 months × $10/month) |
40 |
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Total Operating Expenses |
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90 |
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Net Income |
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$ 235 |
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Budgeted Income Statement—Alternative 2: Weave place mats in linen using new loom.
ANNE MAGNUSON, WEAVER |
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Budgeted Income Statement |
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For the Four Months Ending December 31, 2014 |
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Sales Revenue (15 sets × $50/set) |
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$ 750 |
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Cost of Goods Sold (15 sets × $18/set) |
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270 |
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Gross Profit |
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480 |
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Operating Expenses |
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Sales Commission (10% of sales) |
$ 75 |
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Depreciation Expense [($10/mth. × 4 mths.) + ($20/mth. × 4 mths.)] |
120 |
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Total Operating Expenses |
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195 |
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Operating Income |
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285 |
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Interest Expense ($1,000 × 18% × 4/12) |
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60 |
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Net Income |
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$ 225 |
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Decision Case 22-2, cont.
Requirement 1, cont.
Budgeted Balance Sheet—Alternative 1: Weave place mats in cotton using existing loom.
ANNE MAGNUSON, WEAVER |
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Budgeted Balance Sheet |
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December 31, 2014 |
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Assets |
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Current Assets: |
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Cash |
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$ 401 |
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Property, Plant, and Equipment: |
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Loom |
500 |
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Less: Accumulated Depreciation ($240 + $40) |
(280) |
220 |
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Total Assets |
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$ 621 |
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Liabilities |
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$ 0 |
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Stockholders’ Equity |
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Stockholders’ equity ($386 + $235) |
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621 |
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Total Liabilities and Stockholders’ Equity |
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$ 621 |
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Budgeted Balance Sheet—Alternative 2: Weave place mats in linen using new loom.
ANNE MAGNUSON, WEAVER |
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Budgeted Balance Sheet |
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December 31, 2014 |
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Assets |
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Current Assets: |
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Cash |
$ 96 |
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Inventory of Cotton |
175 |
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Total Current Assets |
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$ 271 |
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Property, Plant, and Equipment: |
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Looms ($500 + $1,000) |
1,500 |
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Less: Accumulated Depreciation ($240 + $120) |
(360) |
1,140 |
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Total Assets |
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$ 1,411 |
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Liabilities |
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Current Liabilities: |
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Note Payable ($1,000 – $200) |
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$ 800 |
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Stockholders’ Equity |
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Stockholders’ equity ($386 + $225) |
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611 |
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Total Liabilities and Stockholders’ Equity |
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$ 1,411 |
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Ethical Issue 22-1
Requirement 1
Ethical issue 1 – (Discuss issue and why it is an issue)
Ethical issue 2 – (Discuss issue and why it is an issue)
Ethical issue 3 – (Discuss issue and why it is an issue)
Requirement 2
Option 1 –
Option 2 –
Option 3 –
Requirement 3
Possible consequences of each of the options listed in Requirement 2 include the following.
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Discussion option 1 consequences – what might happen, what has Dunn already done, what else might Dunn do?
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Discussion option 2 consequences – what might happen, what has Dunn already done, what else might Dunn do?
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Discussion option 3 consequences– what might happen, what has Dunn already done, what else might Dunn do?
Requirement 4 – What should you do?
Option you recommend –
Why?
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