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Question: freewheel is in the process of preparing its master budget...

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Freewheel is in the process of preparing its master budget for the six months ending December 19X2. The balance sheet for the year ended 30 June 19X2 is estimated to be as follows: Cost Deprec prov NBV

Fixed assets 140.000 14.000 126.000

Current assets

Stock 25.000

Trade debtors 24.600

Bank 3.000

Net current liabilities 52.600

Creditors Amount falling due within one year

Trade creditors 25.000

Other creditors 9.000

34.000

Net current assets 18.600

Total assets less current liabilities 144.600

Capital and reserves

Share capital 100.000

Profit and loss account 44.600

144.600

The budget committee have derived the following trading forecasts for the six months ended 31 December 19X2.

Sales Wages Overheads Purchase Issue of

in and excl of fixed 20.000

units Purchases salaries deprec assets 1£shares Dividends

May 4.000 12.000 8.000 7.000

June 4.200 13.000 8.000 7.000

July 4.500 14.000 8.000 7.000

August 4.600 18.000 10.000 7.000

September 4.800 16.000 10.000 7.000 20.000

October 5.000 14.000 10.000 8.000 10.000

November 3.800 12.000 12.000 8.000 30.000

December 3.000 12.000   12.000 8.000

The selling price in May 19X2 was £6 per unit and this is to be increased to £8 per unit in October 50% of sales are for cash and 50% on credit to be paid two months later.

Purchase are to be paid for two months after purchase. Wages and salaries to be paid 75% in the month incurred and 25% in the following month.Overheads are to be paid in the month after they are incurred.The fixed assets are to be paid for in three equal instalments in the three months following purchase. Dividends are to be paid three months after they are declared and the receipts from the share issue are budgeted to be received in the month of issue. Fixed assets are depreciated 10% per annum on a straight line basis on those assets owned at 31 December 19X2. Closing stock at the beginning of the period under review as equal to the previous two months purchases. At 31 december 19X2 it was equal to three months purchases.

Prepare the following budgets for the six months ended 31 December 19X2.

Cash budget,budgeted profit and loss account, budgeted balance sheet.

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