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Cosy Stoves Limited is planning a major capital investment in April 2022 which requires an extension of the companys bank overdraft. The company provides you

Cosy Stoves Limited is planning a major capital investment in April 2022 which requires an extension of the company’s bank overdraft. The company provides you with the following financial information:

Month

Sales

Purchases

Wages

Overheads

£

£

£

£

January 2022 (budgeted)

200,000

100,000

45,000

10,000

February 2022 (budgeted)

225,000

125,000

50,000

12,000

March 2022 (budgeted)

240,000

130,000

52,000

13,000

April 2022 (budgeted)

260,000

135,000

55,000

15,000

May 2022 (budgeted)

250,000

132,000

52,000

14,000

Notes

  1. The bank balance at 1st March 2022 is expected to be £35,000.
  2. 30% of sales are for cash with the other 70% being made on credit. 60% of credit sales pay in the month following the month of sale with the other 40% paying 2 months after the month of sale.
  3. Purchases are paid for in the month after the month in which they are made.
  4. 68% of wages are paid in the current month with the other 32% (representing tax and national insurance deductions) being paid over to the taxation authorities in the following month.
  5. Overheads are paid in the month in which they are incurred.
  6. The Directors of Cosy Stoves Limited are planning to purchase new property, plant and equipment for £300,000 in April 2022 in order to expand the business.

Questions

1. Prepare the cash budget for Cosy Stoves Limited for March, April and May 2022.

  1. Calculate the figures that will appear in the budgeted statement of financial position of Cosy Stoves Limited at 31st May 2022 for:

a. Trade receivables

b. Trade payables

c. Wages and salaries

Step by Step Solution

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1 Prepare the cash budget for Cosy Stoves Limited for March April and May 2022 Cosy Stoves Limited Cash Budget For the Three Months Ended 30 June 2022 ... blur-text-image

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