Reference no: EM132906489

The following are the assumptions for the projected cash flow and profit or loss statements for 20X3 for Zinc Mining Inc.:

• Zinc will sell 176,900 metric tons of zinc at an average price of $2,180 per metric ton. These sales occur evenly throughout the year.
• The operating costs will be $1,442 per metric ton sold and occur evenly throughout the year.
• Wages and salaries will be 7% of sales.
• Royalty costs are 6% of revenue.
• Depreciation is $14,400,000 for 20X3.
• Mining taxes are 11% of revenue.
• General and administration costs are $17,935,000 for 20X2 and will increase by 2.5% for 20X3.
• Interest on the decommissioning obligation is expected to be $750,000. Note that this interest is accrued.
• Income tax is $606,129 for the year.
• Customers pay their accounts on day 40.
• Suppliers of operating costs are paid on day 28.
• All other costs are paid as incurred within the year.
• Capital expenditures for existing operations in 20X3 are expected to be $23,575,000.
• Accounts receivable as at January 1, 20X3, are $13,575,000.
• Accounts payable and accrued liabilities are $3,410,000 as at January 1, 20X3.
• Zinc has two bond issues. The first has a face value of $20,000,000 and a coupon rate of 8%. The second has a face value of $10,000,000 and a coupon rate of 7%. Both pay interest semi-annually on June 30 and December 31, are projected to be outstanding throughout 20X3, and have a carrying value equal to the face value.
• The balance in the cash account on January 1, 20X3, was $25,550,000.

Problem 1: Present a cash budget for Zinc for 20X3.

Problem 2: Present an income statement for Zinc for the year ending December 31, 20X3