QUESTION 4

Jack and Jills, a retail business, has supplied the following information in relation to their actual sales in 2017 and planned sales for the first quarter of 2018.

Cash Credit Total

$ $ $

2017 Actual Sales for November 25,000 25,000 50,000

December 35,000 40,000 75,000

2018 Estimated Sales for January 15,000 20,000 35,000

February 18,000 30,000 48,000

March 22,000 40,000 62,000

Past records indicate that expected receipts collected from debtors will be:

60% in the month of sale

40% in the month following the sale

TASK

1. What is the projected cash inflow from debtors in both January and February? (8 points)[show your working clearly]
2. What is the total cash expected to be collected from all sales in March? (6 points) [show your working clearly]
3. Based on your answers above, explain how the preparation of a cash budget could assist a company to identify short-term problems. (10 points)

(8 + 6 + 10 = 24 marks)