Forest Trails is preparing their budgeted financial statements for the coming period, and has accumulated the following data:
Beginning-of-period balances:
Estimates for end-of-period balances:
Budgeted activity levels for the period:
All sales are on account. Only raw materials are purchased on account. The company has no debt aside from current liabilities. Forest Trails has planned to purchase new equipment worth $25,000, and to sell equipment for $8,000 (Original purchase price $15,000, accumulated depreciation $10,000) to help finance the purchase.
What is the budgeted level of Cash Flow from Operating Activities?

Question

Forest Trails is preparing their budgeted financial statements for the coming period, and has accumulated the following data:
Beginning-of-period balances:
 Estimates for end-of-period balances:
 Budgeted activity levels for the period:
 All sales are on account. Only raw materials are purchased on account. The company has no debt aside from current liabilities. Forest Trails has planned to purchase new equipment worth $25,000, and to sell equipment for $8,000 (Original purchase price $15,000, accumulated depreciation $10,000) to help finance the purchase.
What is the budgeted level of Cash Flow from Operating Activities?

Quizplus · Accepted Answer

Cash Received from Customers:
Sales: 3,125 units x $80/unit = $250,000
Cash received from customers = Beginning A/R + Sales - Ending A/R
= $54,000 + $250,000 - $67,500 = $236,500
Cash Paid for materials:
Purchases $44,800 + Beginning AP 27,000 - Ending AP 18,000 = $53,800
Cash paid for labor: $75,000
Depreciation Expense:
Ending Accumulated $296,000 + Equipment Sold 10,000 - Beginning Accumulated 288,000
= $18,000)
Cash paid for overhead:
$25,000 - Depreciation 18,000 = $7,000
Cash paid for Selling and Administrative: $42,000
Net Cash Flows from Operating Activities:
$236,500 - 53,800 - 75,000 - 7,000 - 42,000 = $58,700 positive cash flow

Forest Trails Is Preparing Their Budgeted Financial Statements for the Coming