Kupa Ltd. has approached their local banker for an overdraft facility in 2021. The banker has asked to provide a cash budget for the first six months of 2021. The company has furnished you with the following information.     Oct 2020 Nov 2020 Dec. 2020 Jan. 2021 Feb. 2021 Mar. 2021 Apr. 2021 May 2021 June 2021 July 2021 Aug. 2021 Sep 2021 Sales (Sh.‘000’) 190 170 200 180 220 240 210 160 180 220 240 220   Sales are made 40% cash. Of credit sales, 30% is collected in the month of sale, 40% one month after sale and 25% two months from sales Gross profit margin is 25%. Goods purchased in a month are sold two months after the month of purchase. Purchases are paid 30% one the month of purchase and the remainder two months thereafter. Cash Overheads average 10% of the monthly sales. Cash Operating expenses are 15% of the monthly sales. New equipment costing Sh. 24,000 will, be purchased for cash in April. Annual depreciation on this equipment will be 25% of the cost. Tax payments for Sh 40, 000 are due in January and March.   The beginning cash balance in 2021 is expected to be Sh 250,000. This cash balance has to be maintained. In case of deficits, borrowing in multiples of Sh 20,000 is made at an interest of 4% per month. Interest must be paid when it accrues and the principal amount borrowed has to be paid soonest possible in the same multiples.   Required: Prepare Kupa's Monthly cash payment for the first six months of 2021 Monthly cash receipts for the first six months of 2021 Monthly cash budget for the first six months of 2021

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Kupa Ltd. has approached their local banker for an overdraft facility in 2021. The banker has asked to provide a cash budget for the first six months of 2021. The company has furnished you with the following information.

 

 

Oct

2020

Nov

2020

Dec.

2020

Jan.

2021

Feb.

2021

Mar.

2021

Apr.

2021

May

2021

June

2021

July

2021

Aug.

2021

Sep

2021

Sales

(Sh.‘000’)

190

170

200

180

220

240

210

160

180

220

240

220

 

  • Sales are made 40% cash. Of credit sales, 30% is collected in the month of sale, 40% one month after sale and 25% two months from sales
  • Gross profit margin is 25%. Goods purchased in a month are sold two months after the month of purchase. Purchases are paid 30% one the month of purchase and the remainder two months thereafter.
  • Cash Overheads average 10% of the monthly sales.
  • Cash Operating expenses are 15% of the monthly sales.
  • New equipment costing Sh. 24,000 will, be purchased for cash in April. Annual depreciation on this equipment will be 25% of the cost.
  • Tax payments for Sh 40, 000 are due in January and March.

 

The beginning cash balance in 2021 is expected to be Sh 250,000. This cash balance has to be maintained. In case of deficits, borrowing in multiples of Sh 20,000 is made at an interest of 4% per month. Interest must be paid when it accrues and the principal amount borrowed has to be paid soonest possible in the same multiples.

 

Required:

Prepare Kupa's

  1. Monthly cash payment for the first six months of 2021
  2. Monthly cash receipts for the first six months of 2021
  3. Monthly cash budget for the first six months of 2021
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