Exercise 1 Preparation of cash budget forecast profit and loss account and balance sheet for a limited company. Courante Ltd.'s balance sheet at 31 December 19-1 is as follows: Fixed Assets Freehold premises Cost Dep. Net 20000 4000 16000 Plant and machinery 15000 9000 6000 35000 13000 22000 Current Assets Stock 12000 Trade debtors 17000 Cash at bank 9500 Administration expenses prepaid 2400 40900 Less: Current Liabilities Trade creditors Selling and distribution expenses accrued 9000 1200 10200 30700 52700 Less: Long term liabilities 12% Debentures 10000 42700 Share Capital and reserves Ordinary share of 1 25000 General Reserve 15000 Retained Earnings 2700 42700 Sale and purchases for the four months to 30 April 19-2 are as follows: Jan Feb Mar Apr Sales 25000 28000 30000 33000 Purchases 10000 8000 12000 15000 It is expected that 40% of sales will be for cash, one month's credit is allowed to debtors. One month's credit is allowed on all purchases. Additional information: 1. Selling and distribution expenses: 10% of sales, payable in following month. 2. Administration expenses: 8000 per month. Prepaid administration expenses at 30 April 19-2: 1300. 3. Stock at 30 April 19-2: 9000. 4. 5. 6. 7. Additional machinery will be purchased on 1 March 19-2 at a cost of 24000. Provision is made yearly for depreciation as follows: freehold premises: 3% on cost, plant and machinery 20% on cost. 50% of all depreciation is charged to selling and distribution expenses and the balance to administration expenses. Debenture interest is payable on 30 June and 31 December. 8. Payment of an interim dividend of 10p a share will be made in April 19-2. 9. It is planned to transfer a further 10000 to general reserve at 30 April 19-2. Required a. A cash budget for Courante Ltd. For the four months to 30 April 19-2. b. A forecast profit and loss account for the four months to 30 April 19-2 and a forecast balance sheet as at that date.