Question 3

Cosy Stoves Limited is planning a major capital investment in April 2022 which requires an extension of the companys bank overdraft. The company provides you with the following financial information:

Month	Sales	Purchases	Wages	Overheads
January 2022 (budgeted)	200,000	100,000	45,000	10,000
February 2022 (budgeted)	225,000	125,000	50,000	12,000
March 2022 (budgeted)	240,000	130,000	52,000	13,000
April 2022 (budgeted)	260,000	135,000	55,000	15,000
May 2022 (budgeted)	250,000	132,000	52,000	14,000

Notes

1. The bank balance at 1st March 2022 is expected to be 35,000.
2. 30% of sales are for cash with the other 70% being made on credit. 60% of credit sales pay in the month following the month of sale with the other 40% paying 2 months after the month of sale.
3. Purchases are paid for in the month after the month in which they are made.
4. 68% of wages are paid in the current month with the other 32% (representing tax and national insurance deductions) being paid over to the taxation authorities in the following month.
5. Overheads are paid in the month in which they are incurred.
6. The Directors of Cosy Stoves Limited are planning to purchase new property, plant and equipment for 300,000 in April 2022 in order to expand the business.

Questions

1. Prepare the cash budget for Cosy Stoves Limited for March, April and May 2022.

1. Calculate the figures that will appear in the budgeted statement of financial position of Cosy Stoves Limited at 31st May 2022 for:

a. Trade receivables

b. Trade payables

c. Wages and salaries