QUESTION THREE [30]

You are provided with information relating to MT-CELL Providers for the two months ending 31 January 2020. Molly Sums owns the business. The business has overdraft bank facilities of R50 000.

1. Sales and Cost of Sales

	Actual Sales	Budgeted Sales	Cost of Sales
October 2019	100 000		75 000
November 2019	120 000		90 000
December 2019		160 000	120 000
January 2020		200 000	150 000

2. 20 % of the total sales are on credit.

3. Debtors are expected to pay their accounts as follows: - 70 % in the month following the month of the sale. - 28 % two months following the month of the sale. - 2 % is to be written off in the third month following the month of the sale.

4. A fixed level of trading stock on hand is maintained throughout the year through replacement on a monthly basis.

5. Purchases of stock: - 65 % of all stock is bought on credit. - Creditors are paid in full in the month following the month of purchase to qualify for a 5 % discount.

6. It has been agreed that the owner M. Sums, will take unused equipment at book value in January for her own use, worth R2 000.

7. R120 000 was invested in fixed deposits with Tar Bank on 1 November 2019. Interest is received on a monthly basis at 15 % p.a., half of these fixed deposits mature on 31 December 2019. The rest matures in February 2020.

8. Rent of R9 000 is payable by MT-CELL Providers at the start of each month. This will be increased by 5 % with effect from 1 January 2020.

9. Total salaries for November 2019 amounts to R18 000. One employee, who earns R1 800 per month, will leave the business at the end of November 2019. The salaries of the remaining employees will be increased by 10 % with effect from 1 January 2020.

10. A vehicle with a carrying value of R50 500 will be traded-in at book value on 01 December 2019 for a new vehicle costing R160 000. A deposit of R19 500 will be paid on 1 December 2019 and the balance of the outstanding amount will be paid in six equal instalments commencing 1 January 2020.

11. The bookkeeper is paid a monthly fee of R2 000.

12. Other operating expenses were R7 500 for November. These expenses are expected to increase by R500 each month thereafter.

13. The business has an overdraft of R17 000 at the beginning of December 2019. Interest is calculated by the bank on the balances at the beginning of each month. Provide for interest at the following rates (calculations to the nearest R.):

- Unfavourable balance: 2 % per month.

- Favourable balance: 1 % per month.

Required: Cash Budget for the period 1 December 2019 to 31 January 2020.