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Hunt Chemicals is preparing a cash budget for June and July 2 0 1 9 . At the end of July 2 0 1 9
Hunt Chemicals is preparing a cash budget for June and July At the end of July
the company has undertaken to repay a loan to their bank which had
been borrowed in February to enable the business to survive during the seasonal
peak in the second quarter of the calendar year, April to June. The bank balance at
June is expected to be
Budgeted sales revenues are as follows:
Additional information:
i of sales revenue is expected in the month of sales, subject to a prompt
payment discount. of sales revenue is expected in the month following sales.
of sales revenue is expected to be received two months after sale and the remainder of
sales revenue is expected to be uncollectable.
ii The average selling price per unit is and the average cost price is of
the purchase price of goods is expected to be paid in the month of purchase and in
the following month.
iii Target closing inventory is equal to the cost of goods sold in the following month plus
iv Budgeted annual overheads are which includes of fixed costs of
which is depreciation. The remainder of the overheads are variable costs which
vary with sales revenue and are paid in the month in which they occurred. The
budgeted sales revenue for is million.
v A dividend of will be paid and noncurrent assets costing will be
purchased and paid for in June while corporation tax of will be paid in July.
Required:
a Produce a cash budget for each of the months June and July in columnar form.
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