Question 3

Use the following information provided by Viking Enterprises to prepare the following for January and February 2022:

3.1 Debtors Collection Schedule (4 marks) Cash Budget (16 marks)

INFORMATION The following information was provided by Viking Enterprises to assist in the preparation of the cash budget for the first two months of 2022:

1. A bank overdraft of R50 000 is expected on 01 January 2022

. 2. Forecasted credit sales are as follows: December 2021 January 2022 February 2022 R180 000 R210 000 R240 000

3. Credit sales usually make up 60% of the total sales. Cash sales make up the balance.

4. Credit sales are normally collected as follows:

20% in the month in which the transaction takes place. These debtors are entitled to a 5% discount.

75% in the following month. The rest is usually written off as bad debts.

5. Budgeted purchases of inventory are as follows:

December 2021 January 2022

February 2022 Credit purchases R70 000 R90 000 R85 000

Cash purchases R60 000 R80 000 R88 000

3.2 Viking Enterprises expects a discount of 10% on half the cash purchases.

Creditors usually offer credit terms of 30 days, which are adhered to.

6. The salaries for February 2022 are expected to amount to R55 080, after an 8% increase takes effect from 01 February 2022.

7. Interest at 18% per annum on the loan balance is payable monthly.

The loan balance on 01 January 2022 is expected to be R200 000 and capital repayments of R10 000 are made at the end of each month.

8. Part of the building is sublet to a tenant. The rental for the year ended 31 December 2021 amounts to R65 500.

The rental agreement, which came into effect during 2019, stipulated that the rental would increase by 10% on 01 February each year.

9. Other operating expenses amount to R10 000 per month.

This amount includes R2 000 for depreciation.

Operating expenses are paid for in the month in which they are incurred.