How to prepare a cash budget for this question? 19. The directors of Nelson Plc are considering investment in new equipment at the endof October. The equipment would cost £100,000 and the finance director has asked youto forecast how much cash the company will have available at the end of October to atleast partly finance the investment.You have been provided with the following information:a)The sales forecast for the period from June to October:JuneSeptemberJuly175August210OctoberSales (Unit)Unit price195235165£145£155£170£160£185b)c)35% of customers pay in the month of sale, the rest pay in the following month.Purchases are 65% of the sales revenue of the corresponding month. Half of thepurchases are paid for immediately and half are paid for in the following month.d)Wages of £9,500 are paid monthly.e)The sales team earn commission of 4% of monthly sales revenue, and this is paidin the month following the sale.Charges for light and heat are £850 per month and are paid every 2 monthsstarting from June.In July the company will dispose of some old machinery which has a net bookvalue of £8,000. The machinery will be sold for £7,000 and the buyer will be givenf)g)1 month's credit.h)At the end of July, Nelson plc has a bank balance of £64,000.Required(a) Prepare a cash budget for each month from August to October.(b) Taking into account the planned purchase of equipment at the end of October,suggest how any resulting cash deficit/surplus could be financed/used.

Cash Budget: A cash budget can be defined as the budget that is prepared to estimate the future cash…

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Business

Accounting

How to prepare a cash budget for this question?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...

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