Question

QUESTION 4

Use the following information provided by Ashleigh Enterprises to prepare the:


4.1 Debtors Collection Schedule for March and April 2021.

4.2 Cash Budget for March and April 2021.

Note: * Where applicable, round off amounts to the nearest Rand.

* Use separate monetary columns for each month.

INFORMATION

1. The following are estimates for the first four months of 2021: January (R) February (R) March (R) April (R) Sales 140 000 120 000 190 000 230 000 Purchases 70 000 60 000 85 000 115 000 Wages 9 000 9 000 ? 

2. Forty percent (40%) of the sales are for cash and the balance is on credit. Collections for credit sales are as follows: 30% during the month of the sale; 65% in the month following the sale. The remaining 5% is written off as bad debts.

3. All purchases are on credit. Creditors are paid two months after the month of purchase.

4. Ashleigh Enterprises will make an investment of R60 000 in fixed deposit on 01 March 2021. Interest of R400 per month is expected to be received from March 2021.

5. Rent expense amounts to R156 000 per year and is payable monthly.

6. Wages will be increased by 9% on 01 March 2021.

7. A new computer is expected to be purchased for R15 000 cash during April 2021.

8. Commission payable to sales personnel is calculated at 10% of sales and it is paid one month later.

9. The bank balance on 28 February 2021 is expected to be R30 000 (favourable).

Answer 1

4.1) Debtors Collection Schedule for March and April 2021 is calculated below:

	March (R)	April (R)
Cash Sale (40%)	76,000	92,000
Collection from credit sale:
30% collected in the month of sale	34,200	41,400
65% collected in the month following the sale	46,800	74,100
Total Collection from Debtors	157,000	207,500

4.2) Cash Budget for March and April 2021 is calculated below:

	March (R)	April (R)
Begining Cash Balance	30,000	82,590
Total Collection from Debtors	157,000	207,500
Collection of interest on Fixed Deposit	400	400
Total Cash Available	187,400	290,490
Cash Disbursement:
Payment for Purchases	70 000	60 000
Rent expenses Paid	13,000	13,000
Wages increased by 9% from March	9,810	9,810
Purchase of new computer		15,000
10% of sales as commission payable and paid one month later	12,000	19,000
Total Cash Disbursement	104,810	116,810
Ending Cash Balance	82,590	173,680