Accounting Question

Complete the Budget in a Service Company (Cash Budget) assignment.   Please use the template provided below.

The assignment has 2 parts.

Part 1 – Complete the budget

Hint:  The 1st quarter budget should start with the January beginning balance and the March ending balance should a be the ending balance for the three months combined column. DO NOT just add the January February and March numbers across. Complete the 1 quarter budget using all the information given in the instructions.

Part 2 – Analysis Add a brief explanation of the budget.

Add an explanation of the budget like what you would do if you were in a meeting with senior management and you were the accountant who was tasked with presenting the budget. Make appropriate suggestions on ways to improve cash flow in future months.

Budget information – Part 1
Cutting Edge Gym is updating all its equipment in 2023 to remain competitive.
Cutting Edge Gym began the year, January 1, 2023 with a cash balance of $10,500
The budget forecast is as follows:
Collections from customers is projected to be $11,000 in January
Collections from customers is projected to be $12,000 in February.
Collections from customers is projected to be $12,500 in March.
The gym is Projected to receive $8,500 in January a one time notes receivable
Edge plans to purchase workout equipment in January. Projected amount is $10,600.
Edge plans to purchase workout equipment in February. Projected amount is $11,600
Edge plans to purchase workout equipment in March. Projected amount is $13,000
Projected Sales and Administrative costs are estimated at $2,900 for January
Projected Sales and Administrative costs are estimated at $2,900 for February
Projected Sales and Administrative costs are estimated at $3,900 for March
Project Accounts Payable payments of $500 in January
Project Accounts Payable payments of $500 in February
Project Accounts Payable payments of $1600 in March
Bank Requirements
Cutting Edge must maintain a minimum cash balance of $15,000 in their bank account at all times on the last day of
If the bank account balance,at month end, is below $15,000, then bank extends credit to Edge immediately in multipl
Edge pays back any amounts borrowed each month in payments of $2000 plus 8% interest.
The first payment occurs three (3) months after the bank has extended edge credit.
-IMPORTANT do not just add the numbers across from columns 1,2 and 3. Start the 3 month budget with the Janu
Budget explaination – Part 2
Add a brief explanation of the budget just like what you would do if you were in a meeting
with senior management and you were the accountant who was tasked with presenting the budget.
Do not just restate the numbers, the managers can read them for themselves.
Sumarize the budget results and make some suggestions about improving cash flow in the future.
Put that explanation in a word document.
mes on the last day of each month
mmediately in multiples of $1000.
budget with the January 1 cash balance
Cutting Edge Gym
Cash Budget
For the Three Months Ended March 31, 2023
January
February
Beginning cash balance
Cash receipts from customers
Collection of note receivable
Total Cash available
Cash payments:
Accounts Payable
Equipment purchases
March
1st Quarter Summary
Selling and administrative expenses
Total cash payments
Ending cash balance before financing
Minimum cash balance desired
Projected cash excess (deficiency)
Financing:
Borrowing
Repayment of principal
Total effects of financing
Ending cash balance
0
15,000
-15,000
0
$0
0
15,000
-15,000
0
15,000
-15,000
0
15,000
-15,000
0
$0
0
$0
0
$0
Cutting Edge Gym
Income Statement
For the Month Ending December 31 , 2022
Revenues:
Sales Revenue
Total Revenue
Cutting Edge Gym
Balance Sheet
December 31, 2022
$12,000
12,000
Expenses:
Rent Expense
Wages
Insurance Expense
Gym Supplies Exp.
Depreciation Exp.
Electric Expense
Telephone Expense
Total Expenses
Net Income
$950
1,150
100
100
300
200
100
Assets:
Cash
Gym supplies
Accounts Receivable
Notes Receivable
Gym Equipment
Less: Accum. Dep – Fixtures.
Total Assets
2,900
Liabilities and Stockholders’ Equity
Liabilities:
Accounts Payable
Income Taxes Payable
Total Liabilities
$9,100
Stockholders’ Equity:
Common Stock
Retained Earnings
Total Stockholders’ Equity
Total Liabilities & Stockholders’ Equity
utting Edge Gym
Balance Sheet
cember 31, 2022
Cutting Edge Gym
Capital Budget
For the Year Ending December 31 , 2023
$10,500
500
13,000
8,500
18,000
3,600
$46,900
1,000
800
1,800
30,000
15,100
45,100
$
46,900
January February
10600 11600
March
13000
April
5000
May
5000
June
0
July
August September October November December
5000
5000
0
5000
5000
0