Question
In: Accounting
Q 16 Brofe Limited retails fertilizer to farmers in Ghana. The company has approached its bankers...
Q 16
Brofe Limited retails fertilizer to farmers in Ghana. The company has approached its bankers to provide funding for next year's operations and a three months master budget has been requested for review by the bankers.
You have been approached by the management as a consultant to prepare the 1st quarter budget for the banker's consideration for its next year's operations.
End of Accounting year December 20X9
GHS
Debtors 23,000
Bank balance 55,000
Non-current asset at cost 698,000
Provision for depreciation balance 98,000
Creditors Balance 48,000
Operating expenses for the month December 50,000
Sales for the month of December 20X9 400,000
December Ending inventory 20,000
Retained earnings 120,000
The following additional information was also provided to assist your work.
i) Depreciation is provided at the rate of 5% on cost of non-current assets
ii) Closing inventory is expected to increased by GHS2000 in January from December levels. This is expected to increase by the same figure in February from the projected figured in January. It is expected that in March closing inventory is desired to be GHS26,000
iii)The company makes a profit of 25% on its sales
iv) Operating expenses is expected to increase by 10% from that of December and this is projected to increase at the same growth rate to March.
v)Sales is projected to grow by 15% from December unit March
vi) The Debtors figure is desired to be proportional to the sales values.
vii)Creditors value for the three months are expected to be as follows January- GHS50,000; February GHS46,000 and in March GHS52,000
You are required as a consultant for Brofre Company Limited to prepare for their Bankers
a)The budgeted statement of profit or loss for the three months.
b) The budgeted statement of financial position for the three months
c)The cash budgeted for the three months.
Solutions
Expert Solution
| a) Budgeted Profit & Loss | |||
| Particulars | Amnt | ||
| Q 1 | Q 2 | Q 3 | |
| Sales | 460000 | 529000 | 608350 |
| Operating expenses | 55000 | 60500 | 66550 |
| Depreciation | 34900 | 34900 | 34900 |
| Ending inventory | 22000 | 24000 | 26000 |
| Opening inventory | 20000 | 22000 | 24000 |
| Excess of closing inventory over opening | 2000 | 2000 | 2000 |
| Profit (25% on sales) | 115000 | 132250 | 152087.50 |
| Sales | 460000 | 529000 | 608350 |
| Add: excess of closing inventory | 2000 | 2000 | 2000 |
| Total | 462000 | 531000 | 610350 |
| Less: | |||
| Operating expenses | 55000 | 60500 | 66550 |
| Depreciation | 34900 | 34900 | 34900 |
| Profit (25% on sales) | 115000 | 132250 | 152087.5 |
| Purchases | 257100 | 303350 | 356812.5 |
| Sales | 460000 | 529000 | 608350 |
| Proportional debtors | 26450 | 30417.5 | 34980.13 |
| 23/400 X 460000 | 23/400 X 529000 | 23/400 X 608350 | |
| Begining debtors | 23000 | 26450 | 30417.5 |
| Add: Sale | 460000 | 529000 | 608350 |
| Less: Ending debtors | -26450 | -30417.5 | -34980.125 |
| Cash received | 456550 | 525032.5 | 603787.375 |
| Begining creditors | 48000 | 50000 | 46000 |
| Add: Purchases | 257100 | 303350 | 356812.5 |
| Less: Ending creditors | -50000 | -46000 | -52000 |
| Cash paid to creditors | 255100 | 307350 | 350812.5 |
| b) Budgeted Financial position | |||
| Liabilities | Amnt | ||
| Q 1 | Q 2 | Q 3 | |
| Opening capital | 530000 | 530000 | 530000 |
| Beginning Retained earnings | 120000 | 235000 | 367250 |
| Add: Profit for the period | 115000 | 132250 | 152087.5 |
| Ending retained earnings | 235000 | 367250 | 519337.5 |
| Creditors | 50000 | 46000 | 52000 |
| Total liabilities | 815000 | 943250 | 1101337.5 |
| Assets | Amnt | ||
| Q 1 | Q 2 | Q 3 | |
| Non current asset at cost | 698000 | 698000 | 698000 |
| Provision for depreciation | -132900 | -167800 | -202700 |
| Ending Inventory | 22000 | 24000 | 26000 |
| Debtors | 26450 | 30417.5 | 34980.13 |
| Bank balance | 201450 | 358632.5 | 545057.375 |
| Total assets | 815000 | 943250 | 1101337.5 |
| c) Budgeted Cash Budget | |||
| Particulars | Amnt | ||
| Q 1 | Q 2 | Q 3 | |
| Opening cash | 55000 | 201450 | 358632.5 |
| Cash received from debtors | 456550 | 525032.5 | 603787.375 |
| Cash available | 511550 | 726482.5 | 962419.875 |
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