Ian operates an automobile repair shop and he has the opportunity to buy an additional machine,which he needs to continue servicing his increasing customer base,at a bargain price of $6,200 if he purchases it by the end of February.In order to meet payroll and other expenses,Ian wants to maintain a $5,000 cash balance.He is trying to determine if he needs to go to the bank for a loan.His accountant has projected the following estimates for the month of February:
Labor,overhead and administrative expenses are paid in the month incurred.Parts are only purchased as needed to repair vehicles.100% of the parts purchases are paid in the month following the purchase.
a.Prepare a cash budget for the month of February.
b.What is the minimum amount that Ian will need to borrow?
c.Prepare a budgeted income statement for the month of February.

Question

Ian operates an automobile repair shop and he has the opportunity to buy an additional machine,which he needs to continue servicing his increasing customer base,at a bargain price of $6,200 if he purchases it by the end of February.In order to meet payroll and other expenses,Ian wants to maintain a $5,000 cash balance.He is trying to determine if he needs to go to the bank for a loan.His accountant has projected the following estimates for the month of February:
  Labor,overhead and administrative expenses are paid in the month incurred.Parts are only purchased as needed to repair vehicles.100% of the parts purchases are paid in the month following the purchase.
a.Prepare a cash budget for the month of February.
b.What is the minimum amount that Ian will need to borrow?
c.Prepare a budgeted income statement for the month of February.

Quizplus · Accepted Answer

The Answer of Ian operates an automobile repair shop and he has the opportunity to buy an additional machine,which he needs to continue servicing his increasing customer base,at a bargain price of $6,200 if he purchases it by the end of February.In order to meet payroll and other expenses,Ian wants to maintain a $5,000 cash balance.He is trying to determine if he needs to go to the bank for a loan.His accountant has projected the following estimates for the month of February:
  Labor,overhead and administrative expenses are paid in the month incurred.Parts are only purchased as needed to repair vehicles.100% of the parts purchases are paid in the month following the purchase.
a.Prepare a cash budget for the month of February.
b.What is the minimum amount that Ian will need to borrow?
c.Prepare a budgeted income statement for the month of February.

Ian Operates an Automobile Repair Shop and He Has the Opportunity