QUESTION 4

20 MARKS REQUIRED Use the information provided below to prepare the following for August and September 2023:

4.1 Debtors Collection Schedule (4 marks)

4.2 Cash Budget. (16 marks)

INFORMATION The following information was provided by Millwall Enterprises:

1. The bank balance on 31 July 2023 is expected to be R56 000 (CR) in the ledger of Millwall Enterprises.

2. Expected credit sales are as follows: July 2023 August 2023 September 2023 R720 000 R792 000 R871 200

3. Credit sales usually make up 75% of the total sales. Cash sales make up the balance.

4. Amounts owing for credit sales are normally collected from the debtors as follows:

4.1 30% in the month in which the transaction took place, and these debtors are entitled to a 5% discount

4.2 65% in the following month The rest is usually written off as bad debts.

5. The budgeted purchases of inventory for July 2023 amounts to R480 000. Inventory purchases thereafter increases by the same percentage as the percentage increase in sales. Fifty percent (50%) of the purchases is for cash and the balance is paid for in month after the purchase. (Separate entries are required for cash purchases and payments to creditors.)

6. The monthly salaries amount to R192 000. Salaries are expected to increase by 6.5% with effect from 01 September 2023.

7. Interest at 18% per annum on the loan balance is payable monthly. The loan balance as at 31 July 2023 was projected to be R480 000 and a repayment of R20 000 (excluding interest) is made at the end of each month.

8. Part of the building is sublet to a tenant and rent is receivable on the last day of each month. The lease agreement for the year ended 31 August 2023 reflected the rental as R230 400 per annum. The annual rental will increase to R254 400 for the period 01 September 2023 to 31 August 2024.

9. Other operating expenses are expected to amount to R26 000 per month. This amount includes R4 000 for depreciation. Operating expenses are paid for in the month in which they are incurred.