Reference no: EM132549253

John commenced business on I January 2012 trading as "John Kitchen Cabinets", selling 3-D kitchen furniture. He had opened a business bank account on 15 December 2011, paying $25000 into it as his opening capital. On 21st December 2011, He rented premises paying the first quarter's rent, due on 25th of December 2011, $1200. Other expenditure in the same month was for the purchase of fixed assets for cash, $8000, and stock $20,000which was bought on one month's credit.

John estimates that his other purchases and the sales for the year to 31st December 2012 will be as follows:

Qtr.                               Purchases                        Sales

$ $

01 Jan - 31 Mar                12,000                 15,000

01 Apr - 30 Jun                 18,000                24,000

01 Jul - 30 Sep                  21,000                30,000

01 Oct - 31 Dec                  15,000                36,000

All purchases and sales will be on one month's credit

Other expenditure in 2012 will be as follows:

January 5 purchase of motor van for cash $5,000; the van is to be depreciated annually at the rate of 20% on cost.

Wages $2,000 per month paid currently.

John will draw $500 per month for leaving expenses. He plans to sell his private car in June for $1500 and to pay the proceeds into the business as additional capital. A friend has also promised to lend the business $6,000 in September 2012.

John's bank has agreed to allow overdraft facilities. If they are required with interest at 10% per annum. Interest will be debited in the bank statements on the last day of each half year and will be calculated on the average overdraft.

Required:

Question 1: Prepare John's Cash Budget for the year to 31st December 2012.