- 20 Marks
MI – Mar-Jul 2020 – L1 – SB – Q4 – Business Process Technologies
Prepare a monthly cash budget for Wareroom Trading Limited for the first three months of 2020 using a columnar format.
Question
The following information relates to Wareroom Trading Limited:
| Month | NOV 2019 | DEC 2019 | JAN 2020 | FEB 2020 | MAR 2020 |
|---|---|---|---|---|---|
| Sales (N) | 850,000 | 950,000 | 720,000 | 750,000 | 780,000 |
| Purchases (N) | 360,000 | 360,000 | 300,000 | 400,000 | 350,000 |
Additional information:
- All sales are on credit, collectible 50% in 30 days, 25% in 60 days, 20% in 90 days, and balance regarded as bad debts.
- All purchases are also on credit, payable 40% in 30 days and 30% each in 60 and 90 days respectively.
- A new generator costing N455,000 will be acquired in February under a 30-day credit agreement.
- An old car will be sold for N50,000 cash in February.
- Monthly salaries are N80,000 payable as and when due.
- Commission on sales is 5% payable to sales agents 2 months in arrears.
- Company income tax of N235,000 is due and payable in January.
- An investment is expected to bring in N60,000 gross in February, subject to 10% withholding tax.
- The staff Christmas party in December is expected to cost the company a total of N90,000, though 60% of the expenses will be pushed for settlement the month following.
- Assume an overdraft of N283,000 on 31 December 2019.
Required:
Prepare a monthly cash budget for Wareroom Trading Limited for the first three months of 2020 using a columnar format. (Total 20 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Budgeting, Cash Budget, Credit Purchases, Credit Sales, Financial planning
- Level: Level 1
- Topic: Business Process Technologies
- Series: MAR/JULY 2020
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