Question
Nana Adom Company Limited is a wholesale company that deals in general goods. The following information relates to the next budget period. Expenses: (in $)
Nana Adom Company Limited is a wholesale company that deals in general goods. The following information relates to the next budget period.
- Expenses: (in $)
October
November
December
Selling & distribution
20,000
30,000
34,000
General & administration
15,000
18,000
12,000
Bad debts
21,000
15,000
20,000
Rate
8,000
6,000
10,000
Interest charges
1,600
2,000
2,400
Depreciation expenses
30,000
10,000
10,000
Expenses are payable in the month of incurrence.
- A contingent liability of $10,000 is expected to mature in November
- Estimated cash balance at the end of September will be $5000. Cash balances should not be less than $10,000. Cash can be borrowed in multiples of $10,000 to finance any deficit at an interest rate of 15% per annum.
- The sales manager's salary, which is $ 7000 per month is expected to increase by $1000 every month after June.
- Motor vehicle will be purchased in November at $240,000. Depreciation for motor van should be calculated at 10% in December.
- Credit purchases have been made as follows:
September$200,000
October$240,000
November$200,000
December$300,000
75% of purchases are paid for in the month of purchase and the remainder in the month after purchase.
- Details of expected sales (in units) are given below:
August20,000
September18,000
October21,000
November15,000
December20,000
Sales are likely to be made at a unit price of $ 30.
- Cash sales is expected to be made as follows: August $140,000
September$100,000
October$200,000
November$120,000
December$140,000
The pattern for the collection of debts from customers is expected to be as follows:
- 60% in the month of sales (3% cash discount allowed).
- 20% in the first month after the month of sale.
- 15% in the second month after the month of sale.
- 5% is usually regarded as bas debt
- Excess funds are invested (in multiples of $10,000) in short term securities, at an interest rate of 20% per annum.
- Borrowing must be paid together with any accrued interest whenever funds are available.
Required
Prepare cash budget, for the three month from October to December showing cash balance at the end of December.[15 Marks]
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Intermediate Accounting Volume 2
Authors: Thomas H. Beechy
5th Edition
0071091319, 978-0071091312
