Elena Ltd, a new business, starts trading in sports shoes on 1 January 2021 and expects...

 

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Elena Ltd, a new business, starts trading in sports shoes on 1 January 2021 and expects to make the following transactions for the 6 months ending 30th June2021: (i) b) (ii) (iii) (iv) (v) (vi) Sales are expected to be 500 units (sports shoes) per month for the 4months from January to April then 300 units per month from May to June. The selling price will be £60 per unit. All sales will be cash sales with cash received in the same month the sale takes place. Payment for Purchases of inventory (sports shoes) will take place on the month after receiving the inventory. Each unit of inventory will cost £40. (vii) Wages are expected to be £1000 per month and will be paid in the month in which they are incurred. Rent will be £2000 per month to be paid quarterly in advance (i.e., the rent payment for January, February and March 2021 will be made on 1st January 2021). General overheads are expected to cost £1000 per month and will be paid in the month in which they are incurred. (viii) Bought a laptop for the business in April for £1,500 Required a) Prepare a cash budget for the 6 months from January to June 2021. Show the cash receipts and cash payments the business expects to have each month and the cash balance at the end of each month. (7marks) Prepare a profit budget for the 6 months ending 30th June 2021. (Smarks) Elena Ltd, a new business, starts trading in sports shoes on 1 January 2021 and expects to make the following transactions for the 6 months ending 30th June2021: (i) b) (ii) (iii) (iv) (v) (vi) Sales are expected to be 500 units (sports shoes) per month for the 4months from January to April then 300 units per month from May to June. The selling price will be £60 per unit. All sales will be cash sales with cash received in the same month the sale takes place. Payment for Purchases of inventory (sports shoes) will take place on the month after receiving the inventory. Each unit of inventory will cost £40. (vii) Wages are expected to be £1000 per month and will be paid in the month in which they are incurred. Rent will be £2000 per month to be paid quarterly in advance (i.e., the rent payment for January, February and March 2021 will be made on 1st January 2021). General overheads are expected to cost £1000 per month and will be paid in the month in which they are incurred. (viii) Bought a laptop for the business in April for £1,500 Required a) Prepare a cash budget for the 6 months from January to June 2021. Show the cash receipts and cash payments the business expects to have each month and the cash balance at the end of each month. (7marks) Prepare a profit budget for the 6 months ending 30th June 2021. (Smarks)

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Sales January to April 500 units per month May to June 300 units per month ... View the full answer