Question
QUESTION THREE (20 Marks) The following projections have been made by Orange Traders for the period ending 31 March 2022: Total sales: January February March
QUESTION THREE (20 Marks)
The following projections have been made by Orange Traders for the period ending 31 March 2022:
- Total sales:
January | February | March |
R1 450 000 | R1 875 000 | R1 400 000 |
- Cash sales are 42% of total sales and these customers are allowed a cash discount of 4% and the balance is on credit.
- Credit sales are collected as follows: 15% in the month of the sale
55% in the month after the sale
28% two months after the sale and the balance is written off as irrecoverable.
- Total purchases:
| January | February | March |
Cash purchases | 62 500 | 150 000 | 200 000 |
Credit purchases | 250 000 | 300 000 | 325 000 |
A discount of 4% is received on cash purchases.
Creditors are paid in full one month after the month of purchases.
- Operating expenses amount to R51 500 for January and are paid in cash. They are expected to increase by 1.5% per month thereafter.
- Monthly salaries amount to R80 000 per month. They are expected to increase by 8.5% with effect from 1 March 2022.
- Rent income is R17 800 per month. The rent will increase to R19 000 on 1 March 2022.
- An investment of R320 000 will be made at My Bank on 28 February 2022. The interest rate will be 9% per annum and paid every month starting on 31 March 2022.
- Orange Traders expects to have an unfavorable bank balance of R124 500 on 1 January 2022.
Required:
Use the information supplied to prepare the following for Silver City Traders for the three months ending 31 March 2022.
- Debtors collection schedule. (6 Marks)
- Cash budget statement. (14 Marks)
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