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Mavuno Ltd. is a small scale company that specializes in the production of farm tools. The company uses budgets for planning and controlling its activities. Currently...

      

Mavuno Ltd. is a small scale company that specializes in the production of farm tools.
The company uses budgets for planning and controlling its activities. Currently the management are
preparing budgets for the three months ending 31 March 2006.

The projected balance sheet as at 31 December 2005 is shown below:
bool2252019950.png
pc2252019951.png

Additional information:

1. The company sells the farm tools at a mark up of 25 %.
2. Purchase of materials stocks is on credit and it is paid for in the month of receipt by the
company
3. Employees are paid wages at the end of every week with the earnings of the last week of the
month being settled in the following month (Assume one month has 4 weeks).
4. Sales commission is paid on month in arrears at the rate of 1% of sales.
5. Overheads include a monthly depreciation charge of Sh. 25,000.
6. 25% of the sales are on cash basis. The other 75% is receivable two months after the sale.
7. The company will receive a loan of Sh.2, 500,000 in the month of March 2006 from Wakulima
Bank.
8. Old equipment will be sold for sh.250, 000 in February 2006 and new equipment will be
purchased at Sh.1, 200,000 to replace the old equipment sold. The new equipment will be paid
for in month of March 2006.
9. Rent is paid for quarterly in advance in the months of January, April, July and October

Required:

(a) Cash budget for the three months ending 31 March 2006.
(b) Budgeted trading profit and loss account for the three months ending 31 March 2006
(c) Budgeted balance sheet as at 31 March 2006.

  

Answers


Martin
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marto answered the question on February 26, 2019 at 05:57


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