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1 markBudgeting and the Master Budget

CAPE Accounting Unit 2 · 2006 · Paper 2 · Question 3(a)(v)

RG Wholesalers is preparing cash flow forecasts for July, August, and September to support a bank loan negotiation. Details are provided regarding current balances, credit sales, collection patterns, cost of goods sold percentage, and operating expenses.

On the basis of the cash budget, discuss whether it is likely that RG Wholesalers will be able to repay the $200 000 loan to Caribbean Dominion Bank at the end of September.

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Other parts of this question

  1. 3(a)(i)Prepare a schedule of cash collections on accounts receivable for July, August, and September.[3 marks]
  2. 3(a)(ii)Prepare a schedule to estimate merchandise purchased for July, August, and September.[5 marks]
  3. 3(a)(iii)Prepare a schedule of estimated cash payments for accounts payable (merchandise purchases) and operating expenses for July, August, and September.[4 marks]
  4. 3(a)(iv)Prepare a cash budget for each of the three months (July, August, and September).[9 marks]
  5. 3(b)(i)Compute the Net Present Value of the three pieces of equipment.[12 marks]
  6. 3(b)(ii)Based on your calculations in part (i), state which is the most attractive opportunity for RG Wholesalers.[1 mark]

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