Thorne Estates Limited advertises and sells residential property on behalf of its customers. The company has been in business for only a short time and is preparing a cash budget for first four months of 2021. Expected sales of residential properties are as follows: 2020 2021 2021 2021 2021 Month Dec Jan Feb Mar Apr Units Sold 10 10 15 25 30 The average price of each property is £180,000 and Thorne Estates charges a fee of 3% of the value of each property sold. Thorne Estates receives a 1% in the month of sale and the remaining 2% in the month after sale. The company has nine employees who are paid on a monthly basis. The average salary per employee is £35,000 per year. If more than 20 properties are sold in a given month, each employee is paid in that month a bonus of £140 for each additional property sold. Variable expenses are incurred at the rate of 0.5% of the value of each property sold and these expenses are paid in the month of sale. Fixed overheads of £4,300 per month are paid in the month in which they arise. Thorne Estates pays interest every three months on a loan of £200,000 at a rate of 6% per year. The last Interest payment in each year is paid in December. Rent of £42,000 will fall due at the end of May. An outstanding tax liability of £95,800 is due to be paid in April. In the same month, Thorne Estates intends to dispose of surplus vehicles, with a net book value of £15,000 for £20,000. The cash balance at the start of January 2021 is expected to be a deficit of £40,000. Required: 1. Prepare a monthly cash budget for the FOUR months from 1st Jan to 30 April 2021. 2. Are there any observations or recommendations that you would make to the management of Thorne Estates arising from your analysis?
Thorne Estates Limited advertises and sells residential property on behalf of its
customers. The company has been in business for only a short time and is
preparing a
properties are as follows:
2020 2021 2021 2021 2021
Month Dec Jan Feb Mar Apr
Units Sold 10 10 15 25 30
The average price of each property is £180,000 and Thorne Estates charges a fee of
3% of the value of each property sold. Thorne Estates receives a 1% in the month of
sale and the remaining 2% in the month after sale.
The company has nine employees who are paid on a monthly basis. The average
salary per employee is £35,000 per year. If more than 20 properties are sold in a
given month, each employee is paid in that month a bonus of £140 for each
additional property sold.
Variable expenses are incurred at the rate of 0.5% of the value of each property
sold and these expenses are paid in the month of sale. Fixed overheads of £4,300
per month are paid in the month in which they arise. Thorne Estates pays interest
every three months on a loan of £200,000 at a rate of 6% per year. The last
Interest payment in each year is paid in December. Rent of £42,000 will fall due at
the end of May.
An outstanding tax liability of £95,800 is due to be paid in April. In the same
month, Thorne Estates intends to dispose of surplus vehicles, with a net book value
of £15,000 for £20,000. The cash balance at the start of January 2021 is expected
to be a deficit of £40,000.
Required:
1. Prepare a monthly cash budget for the FOUR months from 1st Jan to 30 April
2021.
2. Are there any observations or recommendations that you would make to the
management of Thorne Estates arising from your analysis?
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