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QUESTION 1 Your required to prepare a cash budget for Joy Investment, a distributor of baby clothing in Lusaka. The following information is available about

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QUESTION 1 Your required to prepare a cash budget for Joy Investment, a distributor of baby clothing in Lusaka. The following information is available about the company's operations: Cah balance on December 1 will be K40,000 Actual sales for October and November and expected sales for December as follows: SALES OCTOBER DECEMBER NOVEMBER 70,000.00 CASH 65,000.00 83,000.00 CREDIT 400,000.00 525,000.00 600,000.00 Sales on account are collected over a three months period in the following ratios: a 20 % in the month of sales b. 60 % in the following month sale c. 18% in the second month following the sales d. The remaining months is uncollectable Purchases of inventory will total K280,000. 30% in the month of inventory is paid during the month of purchase and the balance in the following month. The accounts payable from November's inventory purchases total to K161 000 all of which will be paid in December Selling and administration cost expenses are budgeted at K430,000 for Decamber of which of this amount depreciation is K50,000 K76,000 will be spend on marketing on cash basis in December and dividends totaling K9,000will be paid during the month A company must maintain a minimum cash balance of K20,000. An open line of credit is available from the company's bank is required TASK a) Prepare a cash budget for December showing supporting schedules for collection of debtors and payment of creditors. (15 Marks) b) Discuss any two canons of expenditure. (5 Marks) [20 MARKS]

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