Tom Patterson, the chief financial officer, is responsible for Gateway Golf’s cash budget for 2015

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Tom Patterson, the chief financial officer, is responsible for Gateway Golf’s cash budget for 2015. The budget will help Patterson determine the amount of long-term borrowing needed to end the year with a cash balance of $135,000. Patterson’s assistants have assembled budget data for 2015, which the computer printed in alphabetical order. Not all the data items reproduced below are used in preparing the cash budget.

(Assumed Data) (In thousands)

Actual cash balance, December 31, 2014............................. $ 145

Budgeted total assets, December 31, 2015............................ 22,677

Budgeted total current assets, December 31, 2015............... 7,576

Budgeted total current liabilities, December 31, 2015........... 4,360

Budgeted total liabilities, December 31, 2015...................... 11,588

Budgeted total stockholders’ equity, December 31, 2015...... 11,089

Collections from customers.................................................. 20,400

Dividend payments .............................................................. 307

Issuance of stock.................................................................. 632

Net income........................................................................... 1,213

Payment of long-term and short-term debt........................... 990

Payment of operating expenses ............................................ 2,849

Payments for inventory items...............................................14,245

Purchase of property and equipment with cash.................... 1,588

 

Requirements

1. Construct the cash budget of Gateway Golf, Inc.

2. Compute Gateway Golf’s budgeted current ratio and debt ratio at December 31, 2015.

Based on these ratio values, and on the cash budget, would you lend $95,000 to Gateway Golf? Give the reason for your decision.