Assignment 1 Question (50 marks; weight 30%) You and your friend started a business in Melbourne importing various coffee paraphernalia (such as cups, glasses and consumables – except coffee beans)...

Assignment 1 Question (50 marks; weight 30%) You and your friend started a business in Melbourne importing various coffee paraphernalia (such as cups, glasses and consumables – except coffee beans) and reselling them to the various cafés in the city. To keep overheads low, the business operates from home. The following information relates to this new business start-up and your expectations of its performance over the next six months. 1. Injection of capital $40,000. 2. Business buys for cash goods for resale amounting to $40,000. 3. Sells, on credit, 90% of these goods at a selling price of cost plus 40%. By the end of the period, only 80% of customers had paid for the goods purchased. 4. Pays wages of 8,000 in cash. 5. Pays other expenses of $3,000 in cash. 6. Buys a new vehicle for $50,000, $30,000 paid in cash and the rest on loan carrying interest at 6% per annum. (a) Prepare a budgeted income statement for the first six months (15 Marks). (b) Prepare a budgeted statement of financial position at the end of the six months. (10 Marks). (c) Prepare a budgeted summary statement of cash flows for the first six months. (15 Marks). (d) Identify the critical decisions (possibly implicit) that have been made that have led to the resulting cash balance. (5 Marks). (e) How might this situation have been avoided? (5 Marks)