CHAPTER 16


Question 10 O’Grady had the following Assets and Liabilities on 01/01/2014:


Assets Stock


Debtors Cash


Insurance Prepaid (2 months) Liabilities


February €88,000


€


63,750 40,000 1,500


800 106,050 106,500


O’Grady expects the sales for the next 7 months will be as follows: January €85,000


March €86,000 April €90,000 May €92,000


(i) 50% of sales are for cash and 50% are on credit, collected one month after sale.


(ii) Gross profit is 25% of sales. (iii) Purchases each month should be sufficient to cover the following month’s sales.


(iv) Purchases are paid for by the end of the month. (v) O’Grady intends to keep a minimum cash balance of €10,000 at the end of each month.


(vi) Any borrowings are in multiples of €1,000 and interest is 12% per annum.


(vii) O‘Grady rents the premises for €13,200 per annum payable as incurred. (viii) O’Grady purchased equipment on 01/03/2014 for €4,000 (depreciation 12% of cost per annum).


(ix) O’Grady purchased office furniture on 01/04/2014 for €8,000 (depreciation 15% of cost per annum).


(x) Wages of €10,000 are paid each month. (xi) Insurance for 6 months €2,400 for the period 01/03/2014 - 31/08/2014 were paid in full in March.


(xii) ¼ of the money borrowed on 31/01/2014 is to be repaid at the end of June together with interest to date on the repaid amount.


You are required to prepare a: (a) Cash Budget for the six-month period from January to June (b) Budgeted Profit and Loss for six months ended 31/06/2014 (c) Balance Sheet as at 31/06/2014


There is insurance prepaid on 01/01/2014.


June €88,000 July €92,000 €


16


265


TIP


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