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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