QUESTION ONE $[25]$

Sun Ltd is a manufacturer of juices. It wholesales to the beverage industry and has been

having issues with cash flows in recent months. They believe their cash flow planning has

been poor and have approached you, an independent accountant to draw up their cash flow

for the next $3$ months.

The data they have provided you are as follows $(2$ months of actual performance and $3$

months of projected performance$)$:

Sales $($all amounts in Rands$)$:

November December January February March

Actual Actual Forecast Forecast Forecast

$80000150000180000240000300000$

$$ The cash from sales are received as follows:

o $30\%$ in the month of sale

o $40\%1$ month after sale

o $30\%2$ months after sale

$$ Purchases are $65\%$ of sales

$$ Cash purchases are made in the following manner:

o $20\%$ cash in the month of purchase

o $40\%1$ month after purchase

o $40\%2$ months after purchase

$$ Cash dividends of R$15000$ was received in January

$$ Rentals of R$7500$ are due and paid at the end of each month

$$ The company has $1$ salaried employee who is paid each month

$$ Wages incurred and paid equate to $8\%$ of the previous months sales

$$ The company bought a new machine in March for R$250000.$ Only a deposit of

R$130000$ was due and payable in March

$$ A provisional tax payment of R$30000$ was made at the end the February

$$ R$15000$ interest was paid against the company$$s bank account in February

$$ Dividends declared at the end of March amounted to R$20000.$ A $1$st payment of

R$10000$ was made on $31$st of March

$$ A loan of R$80000$ was also repaid end March

$$ The bank cash balance at the end of December is R$60000$

Required:

$1\mathrm{.}1.$ Prepare the cash budget for the months of January, February and March $(23)$

$1\mathrm{.}2.$ If the minimum cash balance at the end of every month needs to be R$16000,$ will the

company need to borrow funds to maintain this minimum cash balance at the end of

March or will there be adequate cash reserves to cover the minimum cash holding

required? What will this amount be$?$