Grange Retailers Limited’s financial year ends on 30 June each year. The financial controller of Grange Retailers Limited has assembled the following data to assist in the preparation of a cash budget for the third quarter of the 20X1-20X2 financial year.

ii. Each month, 30 per cent of sales are for cash and the remaining 70 per cent are on credit. The collection pattern for sales is 20 per cent in the month of sale, 50 per cent in the following month and the remaining 30 per cent in the second month after sale.

iii. Each month, the ending inventory equals 50 per cent of the cost of next month’s sales. The mark up on all goods sold is 25 per cent.

iv. Grange Retailers Limited purchases its inventory on credit. It pays for all inventory purchased in the following month.

v. Recurring monthly expenses are as follows: Salaries and wages $10,000 Depreciation on plant and equipment 4,000 Utilities 1,000 Other 7,000

vi. Grange Retailers Limited will pay a dividend of $15,000 on 21 January 20X2.

vii. Advertising fees of $6,000 are due and payable on 10 February 20X2.

viii. A rental agreement for a new storage facility will begin on 2 March 20X2. Monthly lease payments amount to $5,000. Grange Retailers Limited will make the first rental payment at the commencement of the lease.

ix. Grange Retailers Limited has a policy of maintaining a minimum cash balance of $10,000. If necessary, it will borrow to meet its short-term needs. All borrowing occurs on the first day of the month. Payments of principal and interest occur on the last day of the month. The interest rate is 9 per cent per annum. The company must borrow and repay principal in multiples of $1,000.

x. A partially completed balance sheet for Grange Retailers Limited appears on the next page:

Required

(a) Complete the balance sheet as at 31 December 20X1.

(b) Prepare a cash budget for January, February and March (i.e. the third quarter) and for the third quarter in total. Provide supporting schedules of cash receipts and cash payments.

(c) Prepare a pro forma balance sheet as at 31 March 20X2
 
 

i. Sales (20X1-20X2) Month Actual or estimated Sales November (actual) (actual) (estimated) (estimated) (estimated) (estimated) $100,000 120,000 $90,000 December January February March 100,000 135,000 April 110,000