ACC 202 Module Four Written Assignment Template Decision Case 22-2 Using the following given information from requirement 1 (see below), answer requirements 2 and 3. Requirement 2 – On the basis of financial considerations only, what should Magnuson do? Recommendation – Explanation for recommendation – What happens under alternative 1 (use numbers to support) What happens under alternative 2 (use numbers to support) What effect does each have on principal repayments and interest? Requirement 3 – What nonfinancial factors should Magnuson consider? Consideration 1 Why Consideration 2 Why (Feel free to add more) Requirement 1 information (completed for you) Cash Budget—Alternative 1: Weave place mats in cotton using existing loom. ANNE MAGNUSON, WEAVER Cash Budget For the Four Months Ending December 31, 2014 Beginning cash balance $ 25 Cash receipts from the local craft shop [25 sets × {$20/set – (10% × $20/set)}] 450 Cash available 475 Cash payments: Accounts payable balance August 31, 2014 74 Ending cash balance $ 401 Cash Budget—Alternative 2: Weave place mats in linen using new loom. ANNE MAGNUSON, WEAVER Cash Budget For the Four Months Ending December 31, 2014 Beginning cash balance $ 25 Cash receipts from the local craft shop [15 sets × {$50/set – (10% × $50/set)}] 675 Cash available 700 Cash payments: Accounts payable balance August 31, 2014 74 Purchases of linen (15 sets × $18/set) 270 Purchase of new loom 1,000 Interest expense ($1,000 × 18% × 4/12) 60 Total cash payments 1,404 Ending cash balance before financing (704) Financing: Borrowing 1,000 Principal repayments (200) Total effects of financing 800 Ending cash balance $ 96 Decision Case 22-2, cont. Requirement 1, cont. Budgeted Income Statement—Alternative 1: Weave place mats in cotton using existing loom. ANNE MAGNUSON, WEAVER Budgeted Income Statement For the Four Months Ending December 31, 2014 Sales Revenue (25 sets × $20/set) $ 500 Cost of Goods Sold (25 sets × $7/set) 175 Gross Profit 325 Operating Expenses Sales Commission (10% of sales) $ 50 Depreciation Expense (4 months × $10/month) 40 Total Operating Expenses 90 Net Income $ 235 Budgeted Income Statement—Alternative 2: Weave place mats in linen using new loom. ANNE MAGNUSON, WEAVER Budgeted Income Statement For the Four Months Ending December 31, 2014 Sales Revenue (15 sets × $50/set) $ 750 Cost of Goods Sold (15 sets × $18/set) 270 Gross Profit 480 Operating Expenses Sales Commission (10% of sales) $ 75 Depreciation Expense [($10/mth. × 4 mths.) + ($20/mth. × 4 mths.)] 120 Total Operating Expenses 195 Operating Income 285 Interest Expense ($1,000 × 18% × 4/12) 60 Net Income $ 225 Decision Case 22-2, cont. Requirement 1, cont. Budgeted Balance Sheet—Alternative 1: Weave place mats in cotton using existing loom. ANNE MAGNUSON, WEAVER Budgeted Balance Sheet Decem.

1. ACC 202 Module Four Written Assignment Template
Decision Case 22-2
Using the following given information from requirement 1 (see
below), answer requirements 2 and 3.
Requirement 2 – On the basis of financial considerations only,
what should Magnuson do?
Recommendation –
Explanation for recommendation –
What happens under alternative 1 (use numbers to support)
What happens under alternative 2 (use numbers to support)

2. What effect does each have on principal repayments and
interest?
Requirement 3 – What nonfinancial factors should Magnuson
consider?
Consideration 1
Why
Consideration 2
Why
(Feel free to add more)

3. Requirement 1 information (completed for you)
Cash Budget—Alternative 1: Weave place mats in cotton using
existing loom.
ANNE MAGNUSON, WEAVER
Cash Budget
For the Four Months Ending December 31, 2014
Beginning cash balance
$
25
Cash receipts from the local craft shop [25 sets × {$20/set –
(10% × $20/set)}]
450
Cash available
475
Cash payments:
Accounts payable balance August 31, 2014
74
Ending cash balance
$ 401
Cash Budget—Alternative 2: Weave place mats in linen using
new loom.

4. ANNE MAGNUSON, WEAVER
Cash Budget
For the Four Months Ending December 31, 2014
Beginning cash balance
$
25
Cash receipts from the local craft shop [15 sets × {$50/set –
(10% × $50/set)}]
675
Cash available
700
Cash payments:
Accounts payable balance August 31, 2014
74
Purchases of linen (15 sets × $18/set)
270
Purchase of new loom
1,000

5. Interest expense ($1,000 × 18% × 4/12)
60
Total cash payments
1,404
Ending cash balance before financing
(704)
Financing:
Borrowing
1,000
Principal repayments
(200)
Total effects of financing
800
Ending cash balance
$
96
Decision Case 22-2, cont.
Requirement 1, cont.
Budgeted Income Statement—Alternative 1: Weave place mats
in cotton using existing loom.

6. ANNE MAGNUSON, WEAVER
Budgeted Income Statement
For the Four Months Ending December 31, 2014
Sales Revenue (25 sets × $20/set)
$ 500
Cost of Goods Sold (25 sets × $7/set)
175
Gross Profit
325
Operating Expenses
Sales Commission (10% of sales)
$
50
Depreciation Expense (4 months × $10/month)
40
Total Operating Expenses
90
Net Income
$ 235

7. Budgeted Income Statement—Alternative 2:
Weave place mats in linen using new loom.
ANNE MAGNUSON, WEAVER
Budgeted Income Statement
For the Four Months Ending December 31, 2014
Sales Revenue (15 sets × $50/set)
$ 750
Cost of Goods Sold (15 sets × $18/set)
270
Gross Profit
480
Operating Expenses
Sales Commission (10% of sales)
$

8. 75
Depreciation Expense [($10/mth. × 4 mths.) + ($20/mth. × 4
mths.)]
120
Total Operating Expenses
195
Operating Income
285
Interest Expense ($1,000 × 18% × 4/12)
60
Net Income
$ 225
Decision Case 22-2, cont.
Requirement 1, cont.
Budgeted Balance Sheet—Alternative 1: Weave place mats in
cotton using existing loom.

9. ANNE MAGNUSON, WEAVER
Budgeted Balance Sheet
December 31, 2014
Assets
Current Assets:
Cash
$ 401
Property, Plant, and Equipment:
Loom
500
Less: Accumulated Depreciation ($240 + $40)
(280)
220
Total Assets
$ 621
Liabilities
$

10. 0
Stockholders’ Equity
Stockholders’ equity ($386 + $235)
621
Total Liabilities and Stockholders’ Equity
$ 621
Budgeted Balance Sheet—Alternative 2:
Weave place mats in linen using new loom.
ANNE MAGNUSON, WEAVER
Budgeted Balance Sheet
December 31, 2014
Assets
Current Assets:

11. Cash
$
96
Inventory of Cotton
175
Total Current Assets
$
271
Property, Plant, and Equipment:
Looms ($500 + $1,000)
1,500
Less: Accumulated Depreciation ($240 + $120)
(360)
1,140
Total Assets
$ 1,411

12. Liabilities
Current Liabilities:
Note Payable ($1,000 – $200)
$
800
Stockholders’ Equity
Stockholders’ equity ($386 + $225)
611
Total Liabilities and Stockholders’ Equity
$ 1,411

13. Ethical Issue 22-1
Requirement 1
Ethical issue 1 – (Discuss issue and why it is an issue)
Ethical issue 2 – (Discuss issue and why it is an issue)
Ethical issue 3 – (Discuss issue and why it is an issue)
Requirement 2
Option 1 –
Option 2 –
Option 3 -

14. Requirement 3
Possible consequences of each of the options listed in
Requirement 2 include the following.
Discussion option 1 consequences – what might happen, what
has Dunn already done, what else might Dunn do?
Discussion option 2 consequences
– what might happen, what has Dunn already done, what else
might Dunn do?
Discussion option 3 consequences
– what might happen, what has Dunn already done, what else
might Dunn do?
Requirement 4 – What should you do?
Option you recommend -
Why?