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The following are the assumptions for the projected cash flow and profit or loss statements for 20X3 for Zinc Mining Inc.:

Zinc will sell 176,900 metric tons of zinc at an average price of $2,180 per metric ton. These sales occur evenly throughout the year.

The operating costs will be $1,442 per metric ton sold and occur evenly throughout the year.

Wages and salaries will be 7% of sales.

Royalty costs are 6% of revenue.

Depreciation is $14,400,000 for 20X3.

Mining taxes are 11% of revenue.

General and administration costs are $17,935,000 for 20X2 and will increase by 2.5% for 20X3.

Interest on the decommissioning obligation is expected to be $750,000. Note that this interest is accrued.

Income tax is $606,129 for the year.

Customers pay their accounts on day 40.

Suppliers of operating costs are paid on day 28.

All other costs are paid as incurred within the year.

Capital expenditures for existing operations in 20X3 are expected to be $23,575,000.

Accounts receivable as at January 1, 20X3, are $13,575,000.

Accounts payable and accrued liabilities are $3,410,000 as at January 1, 20X3.

Zinc has two bond issues. The first has a face value of $20,000,000 and a coupon rate of 8%. The second has a face value of $10,000,000 and a coupon rate of 7%. Both pay interest semi-annually on June 30 and December 31, are projected to be outstanding throughout 20X3, and have a carrying value equal to the face value.

The balance in the cash account on January 1, 20X3, was $25,550,000

Required:

a) Prepare the cash budget for Zinc for 20X3.

b) Prepare the income statement for Zinc for the year ending December 31, 20X3.

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