Question

Use the following information to answer questions 23 to 30. In order to ascertain clarity on how much cash Musa (Pty) Ltd needs each month, complete the cash budget using the information below. Sales (in rand) are as follows:

:June	July	August	September	October	November
950 000	1 100 000	1 300 000	1 450 000	1 600 000	1 850 000

Of the company’s sales, 40% are done in cash. Credit sales are collected as follows: 

40% during the month of sale 

20% during the first month following the month of sale 

20% during the second month following the month of sale 

20% during the third month following the month of sale

Purchases are as follows:

June	July	August	September	October	November
530 000	600 000	300 000	715 000	880 000	1 000 000

All purchases are on credit and are paid as follows: 

40% during the month of purchase 

30% during the first month following the month of purchase 

15% during the second month following the month of purchase 

15% during the third month following the month of purchase

Other information 

Salaries and wages of R100 000 are paid monthly 

Rent of R50 000 on a monthly basis 

Interest on debt of R4 000 each month

Major maintenance on machines and plant amounting to R1 500 000 in October was undertaken. 

Depreciation costs of R20 000 is charged on a monthly basis 

At the beginning of September, the business will have R50 000 in cash 

The management of the company has a policy of maintaining R50 00 minimum cash balance.

Requirements:

Compile the cash budget for Musa (Pty) Ltd for the months of September, October and November. Also indicate the financing needed to maintain the minimum cash balance and meet the operational requirements.

Question 23

Calculate the total credit sales collected for October.

1. R846 000

2. R896 000

3. R950 000

4. R986 000

Question 24

Calculate the opening balance for October.

1. R430 000

2. R585 800

3. R680 500

4. R720 200

Question 25

Calculate the total credit purchases collected for September.

1. R360 000

2. R460 000

3. R520 500

4. R545 500

Question 26

Calculate the total credit sales collected for November.

1. R566 000

2. R700 000

3. R966 000

4. R975 000

Question 27

Calculate the financing required for October.

1. R239 000

2. R397 500

3. R405 000

4. R515 000

Question 28

Calculate the financing required for November.

1. R154 000

2. R297 500

3. R496 750

4. R515 000

Question 29 Calculate the cash sales for September. 1. R340 000 2. R580 000 3. R650 000 4. R700 000 .

Question 30 Calculate the credit purchases for June that were collected in September. 1. R114 000 2. R140 000 3. R160 000 4. R170 000

Answer 1

ANS 23 ) TOTAL CREDIT SALES COLLECTED  IN THE MONTH OF OCTOBER -

20% CREDIT SALES OF JULY i.e 360000*.20 = 72000

+   20% CREDIT SALES OF AUGUST i.e 780000*.20 = 156000

+ 20% CREDIT SALES OF SEPTEMBER i.e 870000*.20 = 174000

+ 40% CREDIT SALES OF OCTOBER i.e 960000*.40 = 384000

786000

IF WE WANT TO CALCULATE THE TOTAL CREDIT SALES OF OCTOBER - IT COMES OUT TO BE 1600000*.60= 960000

ANS 24 ) OPENING BALANCE FOR OCTOBER = CLOSING BALANCE FOR SEPTEMBER

NOW WE SHALL DO THE WORKING FOR CLOSING BALANCE OF SEPTEMBER

Opening cash of september - 50000

+ cash sales received in september - 580000

+ credit sales received in september - 114000 (june)+72000 ( july )+156000 (august)+348000(september)

- payment for purchases in september - (286000)

- salary paid in september - (100000)

-rent paid in september - ( 50000)

therefore cash at the end of september 880000 . This is opening balance of october .

Ans 25 )

Total credit purchases collected in the month of september - 79500 ( credit our of june 530000*.15 ) + 90000(july 600000*.15) +90000(aug 300000*.30) +286000(september 715000*.40) = 545500

Ans 26)

Total credit sales collected in the month of november - 156000( credit sale of august 1300000*.60*.20) + 174000( credit sale of september 1450000*.60*.20) + 192000 ( credit sales of october 1600000*.60*.20 ) + 444000 (credit sale of november 1850000*.40*.60) = 966000