Reference no: EM132614623
preparing a cash budget to anticipate future cash balance. At the beginning of April, the business cash balance is $26,500. Below are information and estimates for the first few months of your landscaping services business for March, April, May & June 2019.
Month Expected Landscaping Fees Income
March $15,000
April $13,000
May $19,000
June $21,000
- You anticipated that clients usually pay a 50% down payment of the fees in the month of the delivery of the services and the remaining 50% in the following month. You ordered a new computerised landscaping equipment for $12,000 and promise to pay cash upon receiving the equipment in April. In May, you planned to sell an old unused equipment for $10,000.
Estimated cash operating expenses are as follows:
- Wages of $7,000 in total for the three of you, each month
- Supplies expenses in relation with the jobs are estimated to be 5% of the value of the landscaping fees monthly. ? Purchases of plants for landscaping jobs are estimated to be 30% of the value of the landscaping fees monthly.
Required:
Question (a) What is the likely form of organisations of your business? Give your business a name (b) a monthly cash budget for the second quarter of the year: April, May and June.
Question (b) You needed some additional fund to expand the business and want to maintain a positive cash inflows from operations every month to impress your bank manager.
If you did not buy the new computerised landscaping equipment, but instead took an advantage of a new rental/lease arrangement, the same equipment would cost $550 each month. Based on the information available, would you think it's better to lease or buy the new equipment?
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