QUESTION FOUR [25]

You are provided with information of Pick and Packs Supermarket, a business owned by Joshua Moore. Joshua is worried about his poor cash flow situation at the end of September. In order to rectify the situation, Joshua plans to prepare a Cash Budget and to increase his mark-up percentage. Information: a. Joshua currently uses a mark-up of approximately 52% on cost, but he plans to increase this to 75% from 1 October 2021. b. Extracts from the ledger for the past year ended 30 September 2021: Sales R 2 332 800 (distributed evenly over the year) Cost of sales 1 536 000 Trading stock 324 000 Loan from A1 Lenders 90 000 (interest rate 14% p.a.) Bank overdraft 28 000 c. Cash sales comprise 20% of all sales. Joshua predicts total sales and cost of sales to be the following: October November Total sales R210 000 R245 000 Cost of sales R120 000 R140 000 Mark-up% 75% 75% d. Note: Total sales in preceding months are as follows: July 180 000 August 240 000 September 150 000 e. Debtors are expected to settle their accounts as follows: 50% in the month following the sales transaction month (that is, within 30 days). These debtors are entitled to 5% cash discount for prompt settlement. 44% in the second month following the sales transaction month (that is, within 60 days). 6% will be written off as bad debts. f. Purchase of trading inventory: Trading stock is kept at a constant level. (Purchases replace sales in the same month.) All purchases of merchandise are for cash. g. Loan from A1 Lenders: The short-term loan was originally received on 30 September 2021. This is to be repaid in equal instalments over 24 months on the last day of each month. Interest at 14% per annum is also paid on the last day of each month. h. On 1 November 2021, the salary of the shop manager will increase by 12%, while the wages of the six shop assistants will increase by R120 each

REQUIRED:

5.1 Prepare the Debtors' Collection Schedule for October and November 2021. All calculations must be rounded off to the nearest rand. (6)

5.2 Complete the Cash Budget below for October and November 2021. All calculations must be rounded off to the nearest rand. (19)

CASH BUDGET FOR OCTOBER &NOVEMBER 2021 OCTOBER NOVEMBER CASH RECEIPTS R R Cash sales 42 000 Receipts from debtors TOTAL RECEIPTS CASH PAYMENT Cash purchases of trading stock 120 000 Salary of shop manager 12 000 Wages of shop assistant 18 000 Drawings 30 000 30 000 Other operating expenses 12 500 12 500 Repayment of loan Interest on loan 1 050 TOTAL PAYMENT SURPLUS/(DEFICIT) (12 999) BANK AT BEGINNING OF MONTH (28 000) BANK AT END OF MONTH (40 999)