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The board of directors of the Cortez Beach Yacht Club (CBYC) is developing plans to acquire more equipment for lessons and rentals and to expand club facilities. The board plans to purchase about $51,000 of new equipment each year and wants to begin a fund to purchase a $601,000 piece of property for club expansion.

The club manager is concerned about the clubs capability to purchase equipment and expand its facilities. One club member has agreed to help prepare the following financial statements and help the manager ascertain whether the plans are realistic. Additional information follows the financial statements.

CORTEZ BEACH YACHT CLUB
Statement of Income (Cash Basis)
For the Year Ended October 31
		Year 9			Year 8
Cash revenues
Annual membership fees	$	720,000		$	601,000
Lesson and class fees		469,300			361,000
Miscellaneous		4,100			3,100
Total cash received	$	1,193,400		$	965,100
Cash costs
Managers salary and benefits	$	73,000		$	73,000
Regular employees wages and benefits		381,000			381,000
Lesson and class employees wages and benefits		391,000			301,000
Supplies		32,200			31,200
Utilities (heat and light)		44,200			30,200
Mortgage interest		50,000			50,800
Miscellaneous		4,100			3,100
Total cash costs	$	975,500		$	870,300
Cash income	$	217,900		$	94,800

Additional Information

Other financial information as of October 31, year 9:

Cash in checking account, $14,500.

Petty cash, $650.

Outstanding mortgage balance, $732,000.

Accounts payable for supplies and utilities unpaid as of October 31, year 9, and due in November, year 9, $5,100.

The club purchased $51,000 worth of sailing equipment during the current fiscal year (ending October 31, year 9). Cash of $21,000 was paid on delivery, with the balance due on October 1, which had not been paid as of October 31, year 9.

The club began operations in year 3 in rental quarters. In October, year 5, it purchased its current property (land and building) for $1,218,000, paying $242,000 down and agreeing to pay $61,000 plus 4 percent interest annually on the previously unpaid loan balance each November 1, starting November 1, year 6.

Membership rose 2 percent during year 9, approximately the same annual rate of increase the club has experienced since it opened and that is expected to continue in the future.

Membership fees were increased by 10 percent in year 9. The board has tentative plans to increase them by 6 percent in year 10.

Lesson and class fees have not been increased for three years. The number of classes and lessons has grown significantly each year; the percentage growth experienced in year 9 is expected to be repeated in year 10.

Miscellaneous revenues are expected to grow in year 10 (over year 9) at the same percentage as experienced in year 9 (over year 8).

Lesson and class employees wages and benefits will increase to $605,150. The wages and benefits of regular employees and the manager will increase 10 percent. Equipment depreciation and supplies, utilities, and miscellaneous expenses are expected to increase 15 percent.

Required:

a. Construct a cash budget for year 10 for Cortez Beach Yacht Club. (Do not round intermediate calculations.)

CORTEZ BEACH YACHT CLUB Budgeted Statement of Income (Cash Basis) For the Year 10 Cash revenue Annual membership fees Lesson and class fees Miscellaneous Total cash received $0 Cash costs Managers salary and benefits Regular employees wages and benefits Lesson and class employee wages and benefits Supplies Utilities Mortgage interest Miscellaneous Total cash expenses $0 Cash income $0 Additional Cash Flows Cash payments: Mortgage payment Accounts payable balance at 10/31/Year 9 Accounts payable on equipment at 10/31/Year 9 Planned new equipment purchase Total cash payments $0 Beginning cash balance Cash available for working capital and to acquire property $0

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