Medieval Adventures Company Essay
Case 11-1: Medieval Adventures Company
Questions:
1.) Prepare monthly income statements, balance sheets, and cash budgets based on sales increases of 500 units per month and a 30-day advance production for January through September. When will the company need extra funds? How much will be needed? When can a short-term loan to cover the need be repaid?
Please see the attached financial statements that follow.
A projected analysis of the Cash Budget for Medieval Adventures yields a negative cash balance by April month-end. Assuming the company’s costs (expenses) are paid within the month incurred, additional funds are required within the month of April.
Medieval projects a positive cash balance of
$30,000 at March month-end. In April, …show more content…
Therefore, additional funding would
Cost of Producing 571 units:
(19,985)
need to be in place prior to the production of the 572
Balance:
$15
unit.
Further analysis of the Cash Budget indicates a continued cash balance decline to a maximum value of $40,000 at July month-end before trending upward. Not inclusive of taxes or incurred monthly finance charges, a short-term loan of $40,000 could be either be paid lump-sum at the end of October, or via three payments of $7,500, $17,500, and $15,000 in the months of August, September, and
October respectively. See the example amended Cash Budgets below. Note: these amended budgets include assumed continued sales increases of 500 units for the months of October and November.
MEDIEVAL ADVENTURES COMPANY
Cash Budget - Amended to Show $40,000 Loan - 1 Payment
Monthly
30-Apr
31-May
30-Jun
31-Jul
31-Aug
For the month ending:
Cash from Revenues
Cash Paid for Expenses
Increase in Accounts Receivable
Decrease in Accounts Receivable
Increase in Inventories
Decrease in Inventories
Net Cash Flow
Proceeds (Payment) of Loan
Cash at Beginning of
Questions:
1.) Prepare monthly income statements, balance sheets, and cash budgets based on sales increases of 500 units per month and a 30-day advance production for January through September. When will the company need extra funds? How much will be needed? When can a short-term loan to cover the need be repaid?
Please see the attached financial statements that follow.
A projected analysis of the Cash Budget for Medieval Adventures yields a negative cash balance by April month-end. Assuming the company’s costs (expenses) are paid within the month incurred, additional funds are required within the month of April.
Medieval projects a positive cash balance of
$30,000 at March month-end. In April, …show more content…
Therefore, additional funding would
Cost of Producing 571 units:
(19,985)
need to be in place prior to the production of the 572
Balance:
$15
unit.
Further analysis of the Cash Budget indicates a continued cash balance decline to a maximum value of $40,000 at July month-end before trending upward. Not inclusive of taxes or incurred monthly finance charges, a short-term loan of $40,000 could be either be paid lump-sum at the end of October, or via three payments of $7,500, $17,500, and $15,000 in the months of August, September, and
October respectively. See the example amended Cash Budgets below. Note: these amended budgets include assumed continued sales increases of 500 units for the months of October and November.
MEDIEVAL ADVENTURES COMPANY
Cash Budget - Amended to Show $40,000 Loan - 1 Payment
Monthly
30-Apr
31-May
30-Jun
31-Jul
31-Aug
For the month ending:
Cash from Revenues
Cash Paid for Expenses
Increase in Accounts Receivable
Decrease in Accounts Receivable
Increase in Inventories
Decrease in Inventories
Net Cash Flow
Proceeds (Payment) of Loan
Cash at Beginning of