The London Toy Co.Ltd. commenced operations in December 2013 with a capital of 600,000/= which was raised
Question:
The London Toy Co.Ltd. commenced operations in December 2013 with a capital of 600,000/= which was raised through an issue of 600,000 ordinary shares of 1/= each. The proceeds of the share issue were paid into the company bank account. During the course of December a number of transactions took place and these are summarized below
Ugx Ugx
Proceeds from share issue 600,000
Less Leasehold premises (20 years) 300,000
Plant (est. life 10 years) 80,000
Equipment (est. life 10 years) 160,000
Tools 20,000
Raw materials 10,000 (570,000)
Cash balance available 30,000
You are given the following additional information. Sales are budgeted as follows; 80,000/= in January; 160,000/= in February and 240,000/= in subsequent months 50% of the sales will be cash sales and the other 50% credit sales. The period of credit extended to customer will be one month. The cost of raw materials will amount to 40% the sales revenue. Half the materials cost for any one month will be paid in cash; the other half will be paid for during the month of purchase. The company intends to keep a stock of raw materials of 10,000/= throughout the year.
Direct wages will be incurred at the rate of 50,000/= per month. No time lag is expected here. Other expenses-depreciation on premises, plant and equipment will be calculated on straight-line basis. The tools will be re- valued annually and it is expected that annual losses will amount to 20%. All other expenses will be incurred at the rate of 40,000/= per-month. The time lag here will be one month.
Define cash budgeting.
Describe objectives of cash budgeting to organisation.
From the above information prepare;
Cash budget for the period of six months.
Forecast income statement and statement of financial position.
Auditing An International Approach
ISBN: 978-0071051415
6th edition
Authors: Wally J. Smieliauskas, Kathryn Bewley