Mr. Norman is going to set up a new business in Singapore on 1 January 20X8. He
Question:
Mr. Norman is going to set up a new business in Singapore on 1 January 20X8. He will invest $150,000 in the business on that date and has made the following estimates and policy decisions:
1. Forecast sales (in units) made at a selling price of $50 per unit are:
2. 50% of sales are for cash. Credit terms are payment in the month following sale.
3. The units cost $40 each and the supplier is allowed one month’s credit.
4. It is intended to hold inventor y at the end of each month sufficient to cover 25% of the following month’s sales.
5 Administration $8,000 and wages $17,000 are paid monthly as they arise.
6 On 1 January 20X8, the following payments will be made: $80,000 for a five-year lease of the business premises and $350 for insurance for the year.
7 Staff sales commission of 2% of sales will be paid in the month following sale.
Required:
(a) A purchases budget for each of the first six months.
(b) A cash flow forecast for the first six months.
(c) A budgeted statement of comprehensive income for the first six months’ trading and a budgeted statement of financial position as at 30 June 20X8.
(d) Advise Mr. Norman on the investment of any excesscash.
Step by Step Answer:
Financial Accounting and Reporting
ISBN: 978-0273744443
14th Edition
Authors: Barry Elliott, Jamie Elliott