Q3. A Trader provides the following information at the end of May 2020.

Trade Receivables 1/6/20 (April sales 94,000 and May sales 86,000) 180,000

Trade Payables 1/6/20 49,000

Bank balance 1/6/20 27,000

Forecasts for the next five months are

June July August September October

Sales 73,000 65,000 69,300 84,200 54,200

Purchases 38,000 27,800 34,300 41,900 27,000

Expenses 14,100 16,900 16,200 19,500 11,300

You are given the following additional information:

Expenses are paid as incurred

All sales are on credit and are paid for two months after the month of sale.

All purchases are on credit except 12,000 for cash in July , and are paid for one month after the month of purchase.

Rent per month is 1,200 and increases to 1,300 from September 1st. ( rent was not included in expenses above)

Required:

(A) Prepare a cash budget on a monthly basis for the period June to October inclusive and also the total column for the period. (90 marks)

(B) Outline two benefits in preparing a cash budget (10 marks