Question 2 BRADFORD Ltd is starting up a new business on 1 January 20X0 and has provided you with the following information: £ Quarterly Utilities (payment due in March & June) Cash outlay on equipment (payable in February) 12,000 150,000 Monthly planned purchases of stock for re-sale are: January February March April to June (per month) 30,000 34,000 45,000 12,000 All stock is bought on two month's credit Monthly planned sales are January February March 25,000 65,000 35,000 60,000 35,000 38,000 April May June All sales are on one month's credit. 5% discount will be given to customers for sales above 40,000 if payment done on the same month. Customers are normally happy to take discounts when available. The monthly cash outlay on salaries are expected to be £25,000 per month. Depreciation of equipment on the first half year is computed at £50,000. On 1st Jan. 20X0 BRADFORD will provide £400,000 Ordinary Share Capital. The budgeted closing stock at the end of June, 20XO is estimated at £20,000. Required: (a) Prepare a cash budget and a budgeted income statement for the six month period. A balance sheet is not required. Clearly detail your calculations.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Question 2
BRADFORD Ltd is starting up a new business on 1 January 20X0 and has provided
you with the following information:
Quarterly Utilities (payment due in March & June)
Cash outlay on equipment (payable in February)
12,000
150,000
Monthly planned purchases of stock for re-sale are:
January
February
March
30,000
34,000
45,000
12,000
April to June (per month)
All stock is bought on two month's credit
Monthly planned sales are:
January
February
March
25,000
65,000
35,000
60,000
35,000
38,000
April
May
June
All sales are on one month's credit. 5% discount will be given to customers for
sales above 40,000 if payment done on the same month. Customers are normally
happy to take discounts when available.
The monthly cash outlay on salaries are expected to be £25,000 per month.
Depreciation of equipment on the first half year is computed at £50,000.
On 1st Jan. 20XO BRADFORD will provide £400,000 Ordinary Share Capital.
The budgeted closing stock at the end of June, 20X0 is estimated at £20,000.
Required:
(a) Prepare a cash budget and a budgeted income statement for the six month
period. A balance sheet is not required. Clearly detail your calculations.
Transcribed Image Text:Question 2 BRADFORD Ltd is starting up a new business on 1 January 20X0 and has provided you with the following information: Quarterly Utilities (payment due in March & June) Cash outlay on equipment (payable in February) 12,000 150,000 Monthly planned purchases of stock for re-sale are: January February March 30,000 34,000 45,000 12,000 April to June (per month) All stock is bought on two month's credit Monthly planned sales are: January February March 25,000 65,000 35,000 60,000 35,000 38,000 April May June All sales are on one month's credit. 5% discount will be given to customers for sales above 40,000 if payment done on the same month. Customers are normally happy to take discounts when available. The monthly cash outlay on salaries are expected to be £25,000 per month. Depreciation of equipment on the first half year is computed at £50,000. On 1st Jan. 20XO BRADFORD will provide £400,000 Ordinary Share Capital. The budgeted closing stock at the end of June, 20X0 is estimated at £20,000. Required: (a) Prepare a cash budget and a budgeted income statement for the six month period. A balance sheet is not required. Clearly detail your calculations.
(b) Critically discuss the importance of preparing a cash budget for any
organisation, especially when recovering from a pandemic, and the difficulties
this may present.
Note: You must use the relevant academic literature to answer this question and
include references appropriately as an evidence of your wider reading and research.
Transcribed Image Text:(b) Critically discuss the importance of preparing a cash budget for any organisation, especially when recovering from a pandemic, and the difficulties this may present. Note: You must use the relevant academic literature to answer this question and include references appropriately as an evidence of your wider reading and research.
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