You are given the following information for Freewheel Ltd:
At the start of the business in January, investors put 75,000 share capital into the company. The budget for the year to June includes the following forecasts: Sales, Purchases, Wages, and Salaries in units.
Sales:
January - 4,000
February - 2,200
March - 4,500
April - 4,600
May - 4,800
June - 5,000
Purchases:
January - 12,000
February - 13,000
March - 14,000
April - 18,000
May - 16,000
June - 16,000
Wages and Salaries:
January - 8,000
February - 8,000
March - 10,000
April - 10,000
May - 10,000
June - 12,000
The selling price will be $6 per unit for the first 3 months but will increase to $8 per unit in April. 50% of sales are cash, and the remaining 50% are given 2 months credit. Purchases are paid for two months after purchase. Wages and salaries are paid for at the end of each month.
During January, the company purchases machinery for $50,000, fixtures and fittings for $15,000, and a small van for $10,000. The machinery will be paid for in 2 equal installments in the two months following purchase. The fixtures and fittings and the van will be paid for in full in January.
Additional information:
1. The company has closing inventory of $12,000.
2. Rent is $1,500 a month, including rates and insurance, and is paid in the month in which it is incurred.
3. Heat and light bills are paid by direct debit at the end of each quarter. The annual heat and light bill is $5,000.
4. The total dividend declared for the year up to date is $4,000, payable as follows: an interim dividend of $3,000 will be paid in May, and the balance of $1,000 will be paid in October.
5. Half of the tax liability of $1,000 is payable in June, with the balance due in December.
Required: Prepare the following financial statements for the six months ended in June: Cash flow forecast, Income Statement, Statement of Financial Position.
