Scribd
Upload
37 views1 page

Each Autumn As A Hobby Pauline Spahr Weaves Cotton Placemats

Pauline Spahr weaves cotton placemats each autumn as a hobby and sells them in a local craft shop. She is considering buying a new loom that would allow her to weave more intricate linen patterns. To help decide, budgets and financial statements must be prepared for continuing with cotton using the current loom and switching to linen with the new loom. Non-financial factors may also impact Spahr's decision.

Uploaded by

Amit Pandey
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
37 views1 page

Each Autumn As A Hobby Pauline Spahr Weaves Cotton Placemats

Pauline Spahr weaves cotton placemats each autumn as a hobby and sells them in a local craft shop. She is considering buying a new loom that would allow her to weave more intricate linen patterns. To help decide, budgets and financial statements must be prepared for continuing with cotton using the current loom and switching to linen with the new loom. Non-financial factors may also impact Spahr's decision.

Uploaded by

Amit Pandey
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 1

Solved: Each autumn as a hobby Pauline Spahr weaves

cotton placemats
Each autumn as a hobby Pauline Spahr weaves cotton placemats

Each autumn, as a hobby, Pauline Spahr weaves cotton placemats to sell at a local craft shop.
The mats sell for $ 20 per set of four mats. The shop charges a 10% commission and remits the
net proceeds to Spahr at the end of December. Spahr has woven and sold 25 sets in each of
the last two years. She has enough cotton in inventory to make another 25 sets. She paid $ 7
per set for the cotton. Spahr uses a four- harness loom that she purchased for cash exactly two
years ago. It is depreciated at the rate of $ 10 per month. The accounts payable relate to the
cotton inventory and are payable by September 30.
Spahr is considering buying an eight- harness loom so that she can weave more intricate
patterns in linen. The new loom costs $ 1,000; it would be depreciated at $ 20 per month. Her
bank has agreed to lend her $ 1,000 at 6% interest, with $ 200 principal plus accrued interest
payable each December 31. Spahr believes she can weave 15 linen placemat sets in time for
the Christmas rush if she does not weave any cotton mats. She predicts that each linen set will
sell for $ 50. Linen costs $ 18 per set. Spahr’s supplier will sell her linen on credit, payable
December 31.

Spahr plans to keep her old loom whether or not she buys the new loom. The balance sheet for
her weaving business at August 31 is as follows:

Requirements
1. Prepare a combined cash budget for the four months ending December 31, for two
alternatives: weaving the placemats in cotton using the existing loom and weaving the
placemats in linen using the new loom. For each alternative, prepare a budgeted income
statement for the four months ending December 31 and a budgeted balance sheet at December
31.
2. On the basis of financial considerations only, what should Spahr do? Give your reason. 3.
What nonfinancial factors might Spahr consider in herdecision?

Each autumn as a hobby Pauline Spahr weaves cotton placemats

ANSWER
https://solvedquest.com/each-autumn-as-a-hobby-pauline-spahr-weaves-cotton-placemats/

Reach out to [email protected] for enquiry.


Powered by TCPDF (www.tcpdf.org)

You might also like