QUESTION 3 (Red book) (30 MARKS] Spares Online Pty Lid operates a motor spares entity in Johannesburg. Management expect that the cash requirements for the next three months from September 2019 to November 2019 will exceed the normal requirements. A monthly cash budget is necessary to identify possible cash needs up to the end of November from the information and projections, which have been made available. Spares Online Pty Ltd have an overdraft facility of R100 000 interest free. INFORMATION: 1. The following balances appeared, amongst others, in the statement of financial position of Spares Online Pty Ltd, for the year ended on 31 August 2019: R Issued share capital (400 000 ordinary shares) 800 000 Equipment 300 000 20% Mortgage bond 400 000 Bank overdraft 40 990 Receivables 227 920 SA Revenue Services (Income tax) 175 640 2. Sales R June 2019 (actual) 264 000 July 2019 (actual) 334 400 August 2019 (actual) 281 600 September 2019 (budgeted) 385 000 October 2019 (budgeted) 506 000 November 2019 (budgeted) 528 000 Sales take place as follows: Cash sales, 30% Credit sales. 70% 3. Credit sales are normally to be collected as follows: 20% during the month of sales 50% in the next month 30% in the month following the next month Purchases: August 2019 (actual) 140 800 September 2019 (budgeted) 165 000 October 2019 (budgeted) 242 000 November 2019 (budgeted) 264 000 All purchases are on credit. Payables are paid as follows: 80% in the month following the month of purchases and 20% in the following month R Page 6 of 7 FSAO - ACCOBB1/REKOB01 - Accounting B 5. 6. The company will issue 10 000 additional 8% redeemable preference shares on 1 September 2019 from existing shareholders at R2, 50 per share. All monies will be received and shares allocated during October 2019. Employees will receive the following remuneration Salaries to various employees will amount to R11 000 per month. An increase of 11% is planned for November 2019. Two percent commission on cash sales. Commission on cash sales are paid on the last day of each month for that month Total bonus of R52 500 is due to staff in November 2019 8. 7. Sundry expenses amounted to R217 160 for the year ended 31 August 2019. Included in the amount of R217 160 is depreciation of R35 000 Additional equipment amounting to R132 000 will be purchased during September 2019. The amount must be paid in three equal instalments starting from the end of October 2019 to the end of December 2019. No interest will be charge because of the three month repayment agreement. Income tax is payable in September each year. 10. Expected cash received of R6 000 as repayment of a loan to an employee due in November 2019 9. REQUIRED: Prepare a cash budget of Spares Online Pty Ltd for the months September October and November 2019. The budgeted bank balance at the end of each month must be shown (30) Please note: Spares Online Pty Ltd is NOT registered for VAT purposes. Page 7 of 7
