Question 7The summary Balance Sheet of Billy Trading Company on 1 April 2003 was as follow

Question 7

The summary Balance Sheet of Billy Trading Company on 1 April 2003 was as follows:

＄

Equipment (at cost) 180,000

Less: Provision for depreciation (68,400)

Stock 38,600

Debtors 50,000

Total assets 200,200

Financed by:

Share Capital 70,000

Revenue Reserves 50,000

10% debentures 70,000

Proposed dividends 2,200

Bank overdraft 8,000 200,200

Additional information:

1. The following sales, purchases and payment transactions are expected to occur in the next three months:

Sales Purchases Expenses

＄ ＄ ＄

April 360,000 180,000 60,000

May 370,000 200,000 70,000

June 360,000 190,000 80,000

2. All sales are on credit basis and the collection pattern is expected as follows:

(a)80% of the money will be collected in the month of sales. It is estimated that 5% cash discount will be given for collections in this period.

(b)The remaining 20% of the money will be collected in the month subsequent to sales.

3. Payment to creditors is made in the month of purchases in order to take the advantage of 10% discount which is calculated on the gross purchase figures.

4. Depreciation of tide equipment is calculated at a rate of 15% per annum on cost. Depreciation charges have been included in the estimation of expenses for each month from April to June 2003.

5. Expenses are paid in the month in which they are incurred.

6. Stock levels are expected to remain unchanged throughout the period.

7. The proposed dividend will be paid in May 2003.

8. The debentures interest for the three months will be paid in July 2003.

Required:

(a)Prepare a Budgeted Profit and Loss Account for the three months ended 30 June 2003.

(b)Prepare a Cash Budget for each of the three months from April to June 2003.

(c)Prepare a Budgeted Balance Sheet as at 30 June 2003.