It is the end of December 2022 and Palace Ltd is completing the preparation of its...
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It is the end of December 2022 and Palace Ltd is completing the preparation of its short term financial plan for the three months to 31 March 2023. To complete the preparation of the cash budget for each of these months the following projections and assumptionshave been made: Month Sales £ Purchases € January 240,000 150,000 February 300,000 140,000 March 300,000140,000 1. Past experience suggests that the firm will collect 40% of its sales revenue in the month of the sale, 50% one month after the sale, and the balance in the second month following the sale.2. Sales for October, November and December were £200,000, £220,000 and £170,000 respectively:3. Purchases are made in the month of sale but paid for in the following month.4. Purchases for December were £90,000.5. Labour costs follow the shift patterns worked by the company's employees and normally represent 5% of that month's sales, with payment being made in the month that the expense is incurred.6. Administration costs of £50,000 are incurred each month. These are paid in the month they are incurred.7. A VAT payment of £40,000 is due to be paid in March.8. Year- end performance bonuses are paid in January and are estimated to be £20,000.9. The company has decided to replace the motor vehicles of three of its board members in February at a cost of £65,000 per vehicle10. The cash balance at the beginning of January was £20,000. The directors feel that a minimum cash balance of £20,000 should be maintained at all times. Required: Show a cash budget for the three months of January, February and March 2023. It is the end of December 2022 and Palace Ltd is completing the preparation of its short term financial plan for the three months to 31 March 2023. To complete the preparation of the cash budget for each of these months the following projections and assumptionshave been made: Month Sales £ Purchases € January 240,000 150,000 February 300,000 140,000 March 300,000140,000 1. Past experience suggests that the firm will collect 40% of its sales revenue in the month of the sale, 50% one month after the sale, and the balance in the second month following the sale.2. Sales for October, November and December were £200,000, £220,000 and £170,000 respectively:3. Purchases are made in the month of sale but paid for in the following month.4. Purchases for December were £90,000.5. Labour costs follow the shift patterns worked by the company's employees and normally represent 5% of that month's sales, with payment being made in the month that the expense is incurred.6. Administration costs of £50,000 are incurred each month. These are paid in the month they are incurred.7. A VAT payment of £40,000 is due to be paid in March.8. Year- end performance bonuses are paid in January and are estimated to be £20,000.9. The company has decided to replace the motor vehicles of three of its board members in February at a cost of £65,000 per vehicle10. The cash balance at the beginning of January was £20,000. The directors feel that a minimum cash balance of £20,000 should be maintained at all times. Required: Show a cash budget for the three months of January, February and March 2023.
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Related Book For
Management Accounting
ISBN: 9781760421144
7th Edition
Authors: Kim Langfield Smith, Helen Thorne, David Alan Smith, Ronald W. Hilton
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