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4. Budgeting: 14 marks Kawhi Company is a retailer that sells basketball jerseys. The firm began operations six months ago. Sales have exceeded management's most

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4. Budgeting: 14 marks Kawhi Company is a retailer that sells basketball jerseys. The firm began operations six months ago. Sales have exceeded management's most optimistic projections. Kawhi Company's budgeted income statement for each of the first three months in 2020 as follows: Sales Beginning inventory Purchases Ending inventory Cost of goods sold Gross profit Operating expenses Operating profit January $63,000 9,000 56,700 -21,600 44,100 18,900 15.750 $3,150 February $81,000 21,600 66,000 -30,900 56,700 24,300 17,550 $6,750 March $102,000 30,900 73,350 -32,850 71,400 30,600 19,650 $10.950 Additional information 20% of each month's sales are cash sales, 50% each month's sales are collected in the following month, and 30% of each month's sales are collected in the second month after sale. Sales in November and December 2019 are $70,000 and $80,000, respectively. Purchases are paid 70% in the month in which the merchandise inventory is purchased and 30% in the subsequent month. Operating expenses include depreciation of $3,500 and the expenses are paid in the month in which the expenses are incurred. The business erected some shop fittings in December 2019 and the cost $10,000 of the shop fittings will be paid out in January 2020. In January 2020, the business estimated to pay off $18,000 accounts payable related to purchase in December 2019. Cash on hand at 31 December 2019 is $15,000. . Required (a) Answer the following questions (Hint: You can use the Cash budget table on page 6 to help you calculate and organise your answer. You do NOT need to fill in the whole table. Present your answer to the nearest whole number) (i) What is the amount of "Cash sales" in February? (ii) What is the amount of "Cash collection in January" for November 2019's sales? (iii) What is the amount of "Purchase payment in March" for February's purchase? (iv) What is the amount of "Operating expense payment" in February? (v) What is the amount of "Closing cash balance" in March? (10 marks) (b) Give Kawhi Company two suggestions to improve cash flow for the company. (4 marks, maximum of 100 words) Kawhi Company Cash Budget for the 3 months ended 31 March 2020 January February March Receipts Cash sales of the current month (i) Cash collection from last month Cash collection from 2 months ago (ii) Total Inflows Payments Purchase: In the current month From last month (iii) Operating expense (iv) Shop fittings Total Outflows Net cash flow Opening cash balance Closing cash balance (v)

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