Cosy Stoves Limited is planning a major capital investment in April 2022 which requires an extension of
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Question:
Cosy Stoves Limited is planning a major capital investment in April 2022 which requires an extension of the company’s bank overdraft. The company provides you with the following financial information:
Month | Sales | Purchases | Wages | Overheads |
£ | £ | £ | £ | |
January 2022 (budgeted) | 200,000 | 100,000 | 45,000 | 10,000 |
February 2022 (budgeted) | 225,000 | 125,000 | 50,000 | 12,000 |
March 2022 (budgeted) | 240,000 | 130,000 | 52,000 | 13,000 |
April 2022 (budgeted) | 260,000 | 135,000 | 55,000 | 15,000 |
May 2022 (budgeted) | 250,000 | 132,000 | 52,000 | 14,000 |
Notes
- The bank balance at 1st March 2022 is expected to be £35,000.
- 30% of sales are for cash with the other 70% being made on credit. 60% of credit sales pay in the month following the month of sale with the other 40% paying 2 months after the month of sale.
- Purchases are paid for in the month after the month in which they are made.
- 68% of wages are paid in the current month with the other 32% (representing tax and national insurance deductions) being paid over to the taxation authorities in the following month.
- Overheads are paid in the month in which they are incurred.
- The Directors of Cosy Stoves Limited are planning to purchase new property, plant and equipment for £300,000 in April 2022 in order to expand the business.
Questions
1. Prepare the cash budget for Cosy Stoves Limited for March, April and May 2022.
- Calculate the figures that will appear in the budgeted statement of financial position of Cosy Stoves Limited at 31st May 2022 for:
a. Trade receivables
b. Trade payables
c. Wages and salaries
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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