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question 2,preparing cash a budget




Jodie Products Limited is a merchandising company that sells stationery and other school supplies. The company is planning its cash needs for 2014/2015. In the past Jodie Products had to borrow money in order to support peak sales of back-to-school material, which occur during January. The following information has been provided to assist in preparing a cash budget for the period;Budgeted monthy income statement for December 2014 to March 2015;December;January;February;March;N$;N$;N$;N$;Sales;40 000;70 000;50 000;45 000;Cost of sales;24 000;42 000;30 000;27 000;Gross margin;16 000;28 000;20 000;18 000;Operating expenses;Selling expenses;7 200;11 700;8 500;7 300;Administrative expenses;5 600;7 200;6 100;5 900;Net income;3 200;9 100;5 400;4 800;Note the following additional information;? Administrative expenses include N$2 000 depreciation each month.;? 20 % of sales are cash sales. Credit sales are collected over a three-month period in the ratio of 10% in the month of sale, 70% in the month following sale and 20% in the second month following sale. October sales amounted to N$30 000, and November sales to N$36 000.;? Inventory purchases are paid for within 15 days. Therefore 50% of a month?s inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month.;? Purchases amount to 75% of the following month?s sales.;? Dividends of N$1 000 will be declared and paid in February.;? The cash balance on 30 November was N$8 000. The company must maintain a cash balance of at least N$8 000 at all times.;? The company can borrow cash from the bank as needed. Loans are received in multiples of N$1 000. Interest paid on loans are 15% per annum, payable monthly.;Prepare a cash budget for December, January and February. When will Jodie products be able to repay the loan?


Paper#30393 | Written in 18-Jul-2015

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