Part 1

You have been asked by the owner of a new consultancy called Voyager to prepare the master budget. The consultancy consists of the owner who charges out at $68 per hour and the junior staff who are charged out at $42 per hour. The owner has advised you that the following hours are forecast for each quarter.

The consultancy has a credit system of payments with 60% of payment received the quarter in which they are earned and the remaining 40% earned the following quarter. The opening accounts receivable is $13,200 incl GST. The GST is accounted for on an accrual basis.

  1. Prepare a quarterly revenue receipts forecast and cash collections forecast for the next financial year.
Hours September December March June
Senior 250 230 230 230
Junior 210 220 210 220

 

Voyager Co

Revenue Receipts Forecast

30-June

Hours Receivables
Quarter Junior Senior Total Junior @ $42/hr Senior @ $68/hr Total GST Total GST inc
September
December
March
June

 

 

 

Voyager Co

Cash Collections Forecast

30-June

Quarter Receivables September December March June
Opening
September
December
March
June
Closing

 

 

  1. The owner will purchase a new vehicle in the September quarter for $27,500. In December they will purchase photocopiers for $5,500 and a computer system for $5,500 with an upgrade in March for a further $2,750. Each item is inclusive of GST. Prepare the Capital Expense Budget for the financial year.
Voyager Co.

Capital Expenditure Budget

30 June

September December March June Total GST
Car
Photocopier
Computer
Total (net GST)
GST

 

 

  1. The information in the table is based on source documentation from the company’s previous operations. GST Expenses are shown.
September December March June
Motor vehicle 1,300 1,495 300 450
Printing 200 50 200 50
Electricity 600 555 500 500
Rent 4,500 4,500 4,500 4,500

Depreciation is $700 per quarter and tax payable at 30% of net profit per quarter. Wages for the senior staff are $8,000 per quarter and junior $5,000.

Complete the expense budget, budgeted statement of financial performance; you will need to add the non GST items to the expense budget, and the cash flow budget which has an opening cash balance of $42,000. The opening GST liability is 2,000 and the opening PAYG tax instalment is 2,500.

Voyager Co.

Expense Budget

30 June

September December March June
Cash Expenses
Motor vehicle
Printing
Electricity
Rent
Sub Total GST inclusive
GST
Net of GST
Wages Senior
Wages Junior
Subtotal Cash Items
Depreciation
Total

 

Voyager Co.

Budget statement of financial performance

30 June

September December March June Liability
Service revenue
Less Expenses
Subtotal
Income tax 30%
Net Profit

 

Voyager Co

GST Budget

30 June

September December March June Liability
GST Collected on Sales
GST Paid on Expenses
GST Paid on Capital Acquisitions
Net GST

 

Voyager Co.

Budget statement of cash flows

30 June

September December March June
Opening Cash
Add Collections from revenues
Total cash available
Less estimated cash payments
Cash Payments in expense budget
Capital Expenditures
GST Payments*
Tax payments
Total
Closing cash balance

 

  1. Use the cash budget to prepare a graph of quarterly revenue received, payments made and closing cash position.
  2. Explain the graph by answering:
    1. Which quarter has the highest payments, what causes this?
    2. What advice would you give about the purchase of capital items?
    3. Approximately what effect would not be purchasing the capital items have?
    4. Which quarter has the highest revenue received?
    5. Describe the position of closing cash throughout the year. The owner realises that there will be significant expenses in this first year of operations. Identify in which quarter the milestone of revenues exceeding expenditures occurs. What effect does this have on cash?
  1. Suppose that Voyager has non-current assets valued at $55,000 with accumulated depreciation at the beginning of the year of 20,000. Use the depreciation expense for the forecast year and other relevant items to complete the budgeted statement of financial position as at 30th June. Assume no depreciation on new non-current assets and all equity is represented by retained profits.
Voyager Co.

Budget statement of financial position

As at 30 June

Cash at bank
Accounts Receivable
Total Current assets
Non-Current
Less depreciation
Car
Computer systems
Photocopier
Total Assets
Liabilities
GST
TAX
Total Liabilities
Net assets
Owner’s Equity
Retained Profits

 

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