Question 2 Prepare a cash budget of Ebony Company Limited on the basis of the following information for the first six months of 2014: (a) Cost and prices unchanged. (b) Cash sales - 25% and credit sales - 75%. (c) 60% of credit sales are collected in the month after sales, 30% in the second month and 10% in the third. No bad debts are anticipated.

(d) Sales forecasts are as follows: ` ` October 2013. 1,200,000 November 2013. 1,400,000 December 2013. 1,600,000 January 2014. 600,000 February 2014. 800,000 March 2012. 800,000 April 2012. 1,200,000 May 2012. 1,000,000 June 2012. 800,000 July 2012. 1,200,000

(e) Gross profit margin 20%. (f) Anticipated purchases: ` January 2014 640,000 February 2014 640,000 March 2014 960,000 April 2014 800,000 May 2014 640,000 June 2014 960,000

(g) Wages and Salaries to be paid: January 2014. 120,000 February 2014. 160,000 March 2014. 200,000 April 2014. 200,000 May 2014. 160,000 June 2014. 140,000

(h) Interest on GH1,000, 000 @ 12% on debentures is due by the end of March and June.

(i) Excise deposit due in April 200,000. (j) Capital expenditure on plant and machinery planned for June 120,000. (k) Company has a cash balance of 400,000 at 31.12.2013. (l) Company can borrow on monthly basis. (m) Rent is 8,000 per month.