$$ Milpark Education Business Credit BCRE$01-6$ Assignment September $2024$

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Assignment $($BCRE$01-6/$S$210/2024)$

Total: $60$ marks

Note: You will be penalised for the copying of theory without explanation$/$

application to the scenario provided. You should use the theory in support of your

own answer. Non$-$application will result in a zero mark being awarded.

SECTION A $(40$ MARKS$)$ PARAGRAPH QUESTIONS

Answer all the questions.

Question $1(10$ marks$)$

Read the scenario below and answer the questions that follow:

A company applied at its bank for a short$-$term increase in its current overdraft

facility of R$150000$ due to a seasonal increase in turnover. The bank$$s credit

manager requested the company to submit a $3-$month cash flow budget with

its application to confirm the increased amount required and to show whether

the business will be able to repay the increased facility within $3$ months.

The company$$s accountant produced the following actual and projected figures

for the months of May $2023$ to September $2024$:

Actual May $2024$ Jun $2024$

Sales turnover R$2065852$ R$2255800$

Purchases R$1252998$ R$1325880$

Forecasts Jul $2024$ Aug $2024$ Sep $2024$

Sales R$2472584$ R$2722588$ R$1811224$

Purchases R$1125848$ R$1255888$ R$1006552$

The accountant also provided the following additional information:

$40\%$ of debtors are collected in the month following the sale and the

balance in the second month following the sale.

$$ Milpark Education Business Credit BCRE$01-6$ Assignment September $2024$

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$50\%$ of purchases are paid for in the month following the purchase

and $50\%$ in the month thereafter.

$30\%$ of sales are cash sales.

$$ All expenses are paid in the month that they are incurred.

$$ Admin expenses are budgeted to be R$536022$ in July, R$605666$ in

August and R$558875$ in September.

$$ Selling expenses are budgeted to be R$498856$ in July, R$554585$ in

August and R$502562$ in September.

$$ Depreciation expenses will be constant at R$180000$ per month.

$$ At the close of business on $30$ June $2024,$ the company had an

overdrawn bank balance of R$125855$ and an overdraft facility of

R$150000.$

The accountant confirms that the information provided above has been verified

as correct but admitted having problems in the completion of the cash flow

budget that you requested from him. The cash flow budget below is his best

effort in completing the one that you called for:

Jul $2024$ Aug $2024$ Sep $2024$

Total cash collected $214183123425142572586$

Admin expenses $536022605666558875$

Selling expenses $498856554585502562$

Depreciation expense $180000180000180000$

Creditors payments $122586411908681131220$

Total cash payments $234793723766632423645$

Net cash flow $(232129)354187(97934)$

$1\mathrm{.}1$ Copy the table below into your assignment and complete the cash flow

budget for the company for July to September $2024$:

Jul $2024$ Aug $2024$ Sep $2024$

Turnover

Cash sales

Debtors$$ receipts

Total cash collected $[1][1][1]$

Admin expenses

Selling expenses

Depreciation expense $[1]$

Creditors$$ payments

Total cash payments $[1][1][1]$

Net cash flow

Opening bank balance $[1]$

Closing bank balance

Note: round off all amounts to the closest rand. $(8)$

$1\mathrm{.}2$ Determine the maximum overdraft facility that the company requires

during the $3-$month period between July and September $2024$ by

rounding your answer to the closest ten$-$thousandth rand. $(1)$

$1\mathrm{.}3$ Based on the cash flow budget that you prepared, indicate the month in

which the overdraft will reduce back within its initial limit