Mr Norman set up a new business on 1 Januar y 20X8. He invested £50,000 in the new business on that date. The following information is available.
1 Gross profit was 20% of sales. Monthly sales were as follows:
|
Month |
Sales £ |
Month |
Sales £ |
|
Januar y |
15,000 |
May |
40,000 |
|
Februar y |
20,000 |
June |
45,000 |
|
March |
35,000 |
July |
50,000 |
|
April |
40,000 |
2 50% of sales were for cash. Credit customers (50% of sales) pay in month following sale.
3 The supplier allowed one month”s credit.
4 Monthly payments were made for rent and rates £2,200 and wages £600.
5 On 1 Januar y 20X8 the following payments were made: £80,000 for a five-year lease of business premises and £3,500 for insurances on the premises for the year. The realizable value of the lease was estimated to be £76,000 on 30 June 20X8 and £70,000 on 31 December 20X8.
6 Staff sales commission of 2% of sales was paid in the month following the sale.
Required:
(a) A purchases budget for each of the first six months.
(b) A cash flow statement for the first six months.
(c) A statement of operating cash flows and financial position as at 30 June 20X8.
(d) Write a brief letter to the bank supporting a request for an overdraft.