Toys 'R' Us Ltd is preparing its budgets for the quarter beginning 1 January. Stock on hand at the end of December is expected to be $72 000 and the balance at bank $10 000. In view of the pressure on liquid resources the directors have decided to reduce the stock level at the end of each month to an amount sufficient to cover the following two months' sales. Purchases are paid for by the end of the following month; the amount payable for December's purchases is $36 000.

Budgeted sales (which provide a gross profit of 331/3% on cost) are:

$ $

January 40 000. April 38 000

February 42 000 May 52 000

March 46 000 June 44 000

Ten per cent of the sales are for cash and of the credit sales two-thirds are paid for during the month after the sale and the remainder during the following month. Credit sales during November amounted to $24 600 and during December $26 100.

The annual rental for the company's premises is $18 000 payable monthly. Other payments to be made are:

JanuaryFebruaryMay

$ $ $

Salary wages &com 4800 5100 5500

Rates 800

Other expenses 600 1800 2 000

Required:

Prepare the company's cash budget for the quarter beginning 1 January, showing the balance at the end of each month and the total for the quarter.(Total 25 marks)

Answer rating: 100% (QA)

Toys R Us Ltd Cash Budget for the Quarter Beginning 1 January January February March April May June ... View the full answer