QUESTION-7 Smart Ltd has prepared a forecast for the quarter ending 31.12.2009, which is projections: (i) Sales for the period October 2009 to January 2010 has been projected as under: Requi Using Rs. 7,500,000 9,900,000 perdi 10,890,000 10,000,000 October 2009 November 2009 December 2009 January 2010 Cash sale is 20% of the total sales. The company earns a gross profit at 20% of sales. It intends to increase sales prices by 10% from 1.11.2009, however since there would be no corresponding increase in purchase prices the gross profit percentage is projected to increase. Effect of increase in sales price has been incorporated in the above figures. (ii) (iii) 3300 (iv) (v) (vi) (vii) All debtors are allowed 45 days credit and are expected to settle promptly. Smart Ltd follows a policy of maintaining stocks equal to projected sale of the next month. All creditors are paid in the month following delivery. 10% of all purchases are cash purchases. Marketing expenses for October are estimated at Rs.300,000. 50% of these expenses are fixed whereas remaining amount varies in line with the. Value of sales. All expenses are paid in the month in which they are incurred. Administration expenses paid for September were Rs.200,000. Due to inflation, these are expected to increase by 2% each month. Depreciation is provided @ 15% per annum on straight line basis. Depreciation is charged from date of purchase to the date of disposal. (viii) On 31.10.2009 office equipment having book value of Rs.500,000 (40% of the cost) on 1.10.2009 would be replaced at a cost of Rs.2,000,000. After adjustment of trade-in allowance of Rs.300,000 the balance would have to be paid in cash. The opening balances on 1.10.2009 are projected as under: Cashandbank Tradedebts-relatedtoSeptember Tradedebts-relatedto August Fixedassetsat cost (20%arefullydepreciated) Required: (a) Prepareamonth-wise cash budgetforthequarter endingDecember31, 20X9. (b) Prepareabudgeted profitandlossstatement for thequarter ending December 31, 20X9. Rupees 2,500,000 5,600,000 3,000,000 8,000,000