Question 4 The CEO of Grawnwin Ltd. wishes to prepare a cash flow budget to estimate the company's cash surplus or deficit. Grawnwin's Statement of Financial position is as follows. Statement of Financial Position of Grawnwin Ltd. as of 31 January 202 50006000 Non-current assets at cost Premises Less: accumulated depreciation on Premises Fumiture Less: accumulated depreciation on furniture Current assets Cash 200 Recelvables Closing Inventory Prepaid expenses TOTAL ASSETS \begin{tabular}{rr} 2000 & \\ 400 & 1600 \\ \hline 1000 & \\ 200 & 800 \\ \hline & 2400 \end{tabular} Current liabilities: Payables Short term loan Outstanding Expenses 30 Bank overdraft 60 50 40 75 25 330 2730 Non-current liabities Debentures 350 350 Equity Ordinary share capital Share Premium TOTAL EQUTY 8 UABIUTIES 450502730500 Additional Notes The directors of the company have prepared the following estimates for the next 6 months: (b) All sales are on credit. 40% of debtors pay one month after the month of sale. 40% of debtors pay two months after the month of sale, 20x of the debtors pay three months after the sale. Sales in January 2002 were 20,000. Sales in December 20x1 were 22,000. (c) All purchases are on one month's trade credit (d) The Short-term loan is due for payment in March 202. (e) The Outstanding expenses are due for paryment in April 2002. (f) Administration and finance expenses (including depreciation of Premises) are expected to be f35,000 per month in february and 40,000 per month in subsequent months: (g) Selling and distribution expenses (including depreciation of furniture) are expected to be 45,000 per month in February and f48,000 per month in subsequent months. (h) Depreciation of Premises is at the rate of 985 of cost per annum. (1) Depreciation of Furniture is at the rate of 12% of cost per annum. Required: - a. Prepare a cash budget for Grawnwin ttd. for the six months ended 31 July 2002 which shows the cash balance at the end of each month. (10 Marks) b. Critically discuss the cash flow problems will the company face over the next six months and how might the company deal with them? (10 Marks) TOTAL MARKS =20
