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    Balance and Cash Budget for Rengaw Ltd

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    **See attachment for company's September 2004 Balance Sheet and other additional information.


    (a) Prepare Rengaw Ltd's Balance Sheet immediately after the attached transations were completed, and before any further transations had taken place.

    (b) Prepare a cash budget in columnar form for each of the four months of October 2004 to January 2005. (All calculations should be made to the nearest $000)

    (c) State four actions the directors could take to avoid the overdraft limit being exceeded. Where possible, state the effects of each of the action on the bank balance.

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    Solution Preview

    The details are in the attached file.

    (a) The journal entries are made. The redemtion premium on debentures and preference is a loss and goes to reduce the retained profits. The cash balance is opening of 28 and 45 from new issue. This is utilised for redeption of debentures and preference shares. The shortfall of 5 is met from borrowing. These changes are reflected in the balance sheet. The directors intention of having a reserve equal to amount of debentures redeemed is not reflected as it is only an intention.

    (b) The cash budget is prepared. The ...

    Solution Summary

    The solution prepares the balance sheet and cash budget after some transactions have taken place. It also provides actions to be taken to reduce the overdraft