Mr. Folivi intended to start a business to be known as Knightsbridge Enterprise He provides you with
Question:
Mr. Folivi intended to start a business to be known as Knightsbridge Enterprise He provides you with the following information:
1. His fixed deposit is having a present value of GH¢6,000. This will be the beginning cash for the purpose of his intended business.
2. Mr. Folivi was promised sales orders amounting to GH¢54,000 and GH¢90,000 respectively for the first two quarters of 2021. From July onwards, sales are expected to be steady at the rate of GH¢150,000 per quarter. Customers will be given two month grace period to make payment.
3. He will maintain an inventory of goods costing GH¢40,000 which have to be delivered in December 2020 if the business is to start in January 2021.
4. The goods will be sold, on average, at a gross profit margin of 20%.
5. A motor vehicle will be purchased and paid for in January 2021 for GH¢15,000. It is expected to last for 5 years and be worth about GH¢5,000 at the end of that period.
6. Mr. Folivi will arrange for monthly supplies of goods sufficient to replace items sold. The supplier will allow two months of credit for all supplies, including the initial stocks to be delivered in December 2020.
7. He will conduct most of his business from home but will rent a warehouse to store the goods. He will pay 2 years' rent of GH¢4,800 payable half-yearly in equal amounts for the two years commencing January 2021.
8. A Sales Executive will be engaged with a quarterly salary of GH¢1,000 payable monthly.
9. Telephone bills and electricity are expected to be GH¢200 and GH¢300 respectively on a quarterly basis. Other relevant expenses are estimated at GH¢400 per quarter payable in cash.
10. Mr. Folivi will require his bank to meet all his other cash needs if the business is undertaken.
Prepare: (i) A cash budget for each of the four quarters of 2021for Knightsbridge Enterprise
(ii) A budgeted income statement for the year 2021 for Knightsbridge Enterprise
Expert Answer:
Payments for purchases made Note 1 Particulars Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sales 18000 18000 18000 30000 30000 30000 50000 500... View the full answer
