Timone Limited, a beer wholesaling company has the following budgeted information: Month Sales values (before trade discount) GH¢ Purchases GH¢ Operating costs GH¢ May 960,000 800,000 115,000 June 1,020,000 600,000 110,000 July 810,000 900,000 120,000 August 1,200,000 1,100,000 130,000 September 1,410,000 700,000 125,000 Additional information: 20% of sales are cash terms and cash customers enjoy a 5% trade discount based on the selling price. The remaining sales are on credit terms, 70% of which are collected in the month following sale and 30% of which are collected in the second month following Timone Limited sets its selling price on a uniform mark up of 50% of the cost of goods sold for both cash and credit All purchases are bought on credit and paid in the following month after Timone Limited will buy a new meat cutting machine at a cash price of GH¢300,000 on 1 August. The old meat cutting machine, with a cost and carrying amount of GH¢210,000 and GH¢156,000 as at 1 August, will be traded in against the new machine at a trade-in allowance of GH¢120,000. At all times, Timone Limited has only one meat cutting machine in operation and it is the only non-current asset of the The operating costs include the monthly depreciation expense of the meat cutting machine. All monthly operating costs, other than the depreciation expense, are paid in the month when they are incurred. Both the old and new meat cutting machines are depreciated at 20% per annum on a straight-line basis. The expected cash balance as at 30 June is GH¢308,000. Required: (a) Prepare a monthly cash budget for July, August and September together with a total column for the quarter.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Timone Limited, a beer wholesaling company has the following budgeted information:

Month	Sales values (before trade discount) GH¢	Purchases GH¢	Operating costs GH¢
May	960,000	800,000	115,000
June	1,020,000	600,000	110,000
July	810,000	900,000	120,000
August	1,200,000	1,100,000	130,000
September	1,410,000	700,000	125,000

Additional information:

20% of sales are cash terms and cash customers enjoy a 5% trade discount based on the selling price. The remaining sales are on credit terms, 70% of which are collected in the month following sale and 30% of which are collected in the second month following

Timone Limited sets its selling price on a uniform mark up of 50% of the cost of goods sold for both cash and credit

All purchases are bought on credit and paid in the following month after

Timone Limited will buy a new meat cutting machine at a cash price of GH¢300,000 on 1 August. The old meat cutting machine, with a cost and carrying amount of GH¢210,000 and GH¢156,000 as at 1 August, will be traded in against the new machine at a trade-in allowance of GH¢120,000. At all times, Timone Limited has only one meat cutting machine in operation and it is the only non-current asset of the

The operating costs include the monthly depreciation expense of the meat cutting machine. All monthly operating costs, other than the depreciation expense, are paid in the month when they are incurred. Both the old and new meat cutting machines are depreciated at 20% per annum on a straight-line basis.

The expected cash balance as at 30 June is GH¢308,000.

Required:

(a) Prepare a monthly cash budget for July, August and September together with a total column for the quarter.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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