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Albe Limited was incorporated some five years ago. The financial position as at 31 st December, 2010 was as follows: EQUITY AND LIABILITIES GHC GHC

Albe Limited was incorporated some five years ago. The financial position as at 31st December, 2010 was as follows:

EQUITY AND LIABILITIES

GHC

GHC

Stated capital:

Ordinary share [40,000 at GHC12.50 each]

Preference shares [20,000 at GHC8.00 each]

Long term capital

NON-CURRENT ASSETS

Building and Land

Equipment

Motor Vehicles

CURRENT ASSETS

Inventory

Accounts Receivables

Cash at bank

CURRENT LIABILITIES

Accounts payable

TOTAL ASSETS

40,000

20,000

124,000

184,000

(14,000)

500,000

160,000

660,000

140,000

800,000

400,000

182,000

48,000

630,000

170,000

800,000

The Company has produced the following estimates:

The accounts payable figure of GHC14,000 stated in the financial statement would be paid in January, 2011.

The following credit purchases are settled a month after the month of purchase, after deducting two percent (2%) discount.

GHC

January 28,000

February 42,000

March 36,000

April 45,000

May 41,000

June 37,000

Sales for January will be GHC51,300 and will increase at the rate of 20% per month until March. In April, sales will rise to GHC80,000 and this will rise by10% per month thereafter.

Sales will be divided equally between cash and credit sales. Credit customers are expected to pay two months after the sales.70% of sales will be generated by sales agents who will receive 10% commission on sales.

The commission is payable one month after the sales.

The company intends to purchase further equipment in August for GHC45,000. However, a deposit of 20% is supposed to be made in June.

Accounts receivable as at 31/12/2010 will be settled in January, 2011.

Other overheads will be GHC6,500 per month for the first three months and GHC8,400 thereafter. Wages and salaries will be GHC16,000 per month. Both types of expense will be payable when incurred.

Depreciation is to be provided at the rate of 10% per annum on land and building and 20% per annum on equipment (depreciation has not been included in the overheads mentioned above).

Required:

Prepare a monthly Cash Budget for Albe Ltd for January 2011 to June 2011.

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