a) Prepare a projected cash flow statement for the six months ending 30 November that shows the cash balance at the end of each month b) Compute the projected inventories levels at the end of each month for the six months to 30 November c) Prepare a projected income statement for the six months ending 30 November. d) What problems is Newtake Records Ltd likely to face in the next six months? Can you suggest how the business might deal with these problems
a) Prepare a projected cash flow statement for the six months ending 30 November that shows the cash balance at the end of each month b) Compute the projected inventories levels at the end of each month for the six months to 30 November c) Prepare a projected income statement for the six months ending 30 November. d) What problems is Newtake Records Ltd likely to face in the next six months? Can you suggest how the business might deal with these problems
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
| a) Prepare a projected |
| ending 30 November that shows the cash balance at the end of |
| each month |
| b) Compute the projected inventories levels at the end of each |
| month for the six months to 30 November |
| c) Prepare a |
| 30 November. |
| d) What problems is Newtake Records Ltd likely to face in the next |
| six months? Can you suggest how the business might deal with |
| these problems |
Transcribed Image Text:Newtake Records Ltd
Forecast Information
August
£ 180,000.00 £ 230,000.00 £ 320,000.00 £ 250,000.00 £ 140,000.00 £ 120,000.00 £ 110,000.00
£ 135,000.00 £180,000.00 £142,000.00 £ 94,000.00 £ 75,000.00 £ 66,000.00 £ 57,000.00
£ 52,000.00 £ 55,000.00 £ 56,000.00 £ 53,000.00 £ 48,000.00 £ 46,000.00 £ 45,000.00
£ 22,000.00 £ 24,000.00 £ 28,000.00 £ 26,000.00 £ 21,000.00 £ 19,000.00 £ 18,000.00
£ 22,000.00
£ 5,000.00 £ 5,000.00 £ 5,000.00 £ 5,000.00 £ 5,000.00 £ 5,000.00 £ 5,000.00
£ 14,000.00 £ 18,000.00 £ 6,000.00
May
June
July
September
October
November
Expected Sales
Purchases
Admin Expenses
Selling Expenses
|Таx Payment
Finance Payments
Shop Refurbishment
Transcribed Image Text:Notes:
1 Inventories held at 1 June were £112,000. The business believes it
is necessary to maintain a minimum inventories level of £40,000
over the period to 30 November of the same year.
2 Suppliers allow one month's credit. The first three months'
purchases are subject to a contractual agreement that must be
honoured.
3 The gross profit margin is 40 per cent.
4 All sales income is received in the month of sale. However, 50 per
cent of customers pay with a credit card. The charge made by the
credit card business to Newtake Records Ltd is 3 per cent of the
sales value. These charges are in addition to the selling expenses
identified above. The credit card business pays Newtake Records
Ltd in the month of sale.
5 The business has a bank loan that it is paying off in instalments of
£5,000 per month. The interest element represents 20 per cent of
each instalment.
6 Administration expenses are paid when incurred. This item includes
a charge of £15,000 each month in respect of depreciation.
7 Selling expenses are payable in the following month.
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