QUESTION THREE [25]

The following data appeared in the financial records of DLT Projects Limited:

1. Revenue and expense figures reflected the following:

Actual Estimated

January February March April May

R R R R R

Revenue 192 000 240 000 120 000 320 000 400 000

Purchases 200 000 100 000 320 000 168 000 120 000

Revenue Commission 800 1 200 2 400 1 600 800

Wages 1 600 1 600 1 600 ? ?

2. Cash transactions:

- 40% of all revenue are for cash with the balance being on credit.

- 35% of all purchases are for cash with the balance being on credit.

3. Collections for credit revenue are as follows:

- 20% is collected in the month of the revenue and a 2% discount is granted on these collections.

- 60% is collected in the month following the month of revenue.

- 15% is collected in the second month following the month of revenue.

- The remaining 5% is written off as bad debts.

4. The company will make an investment of R170 000 in fixed deposit on 01 April. Interest of R3 500 per month is expected to be received from 30 April.

5. Creditors are paid two months after the date of invoice.

6. Rent expense amounts to R11 000 per month and is payable on the first day of each month.

7. Wages will be increased by 10% in April and will increase by a further 5% in May.

8. A new machine is expected to be purchased for R30 000 cash on 1 May. Depreciation is calculated using the straight-line method.

9. Revenue commission is paid in the month following the month in which it was earned.

10. On 31 March the company had a bank overdraft of R5 000.

Required:

3.1 Prepare a Debtors Collection Schedule for April and May. (8)

3.2 Prepare the Cash Budget for April and May.(17)