QUESTION 1 Nana Adom Company Limited is a wholesale company that deals in general goods. The following information relates to the next budget period. 1. Expenses: (in GH) 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. 2. A contingent liability of GH10,000 is expected to mature in November 3. Estimated cash balance at the end of September will be GH5000. Cash balances should not be less than GH10,000. Cash can be borrowed in multiples of GH10,000 to finance any deficit at an interest rate of 15% per annum. 4. The sales manager's salary, which is GH 7000 per month is expected to increase by GH1000 every month after June. 5. Motor vehicle will be purchased in November at GH240,000. Depreciation for motor van should be calculated at 10% in December. 6. Credit purchases have been made as follows: September GH200,000 October GH240,000 November GH200,000 December GH300,000 75% of purchases are paid for in the month of purchase and the remainder in the month after purchase. 7. Details of expected sales (in units) are given below: August 20,000 September 18,000 October 21,000 November 15,000 December 20,000 Sales are likely to be made at a unit price of GH 30. 8. Cash sales is expected to be made as follows: August GH140,000 September GH100,000 October GH200,000 November GH120,000 December GH140,000 The pattern for the collection of debts from customers is expected to be as follows: a. 60% in the month of sales (3% cash discount allowed). b. 20% in the first month after the month of sale. c. 15% in the second month after the month of sale. d. 5% is usually regarded as bas debt 9. Excess funds are invested (in multiples of GH10,000) in short term securities, at an interest rate of 20% per annum. 10. 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]