Unit 2 Financial ProjectionSource: 2015 Business Administration 3A Assignment: Question 2

QUESTION 2 (Z0 MARKS)

REQUIRED

Use the information provided to prepare a Pro-Forma Statement of Comprehensive Income for July and August 2015 (using separate monetary columns for each month).

INFORMATION

The Statement of Comprehensive Income of Branson Enterprises for the year ended 30 June 2015 is as follows:

RSales3 000 000Cost of sales expense(2 000 000)Gross profit1 000 000Rent income108 000 1 108 000Operating expenses(720 000)Salaries360 000Advertising120 000Bad debts60 000Depreciation30 000Other operating expenses150 000Operating profit388 000Interest expense(38 000)Net profit350 000

Additional information

1. Sales for the period 01 April to 30 June 2015 are R240 000 per month. Sales for July 2015 are

expected to be 5% greater than the sales for June 2015. A decrease of 10% is expected during August 2015 on the July 2015 sales.

2. Cash sales account for 40% of the total sales, with the balance of the sales on credit. Five percent of the credit sales are expected to be irrecoverable and these are written off three months after the sale.

3. The existing mark-up percentage on cost will be maintained during July and August 2015.

4. The rental agreement makes provision for an increase of 12% each year, effective from 01 July.

5. Salaries are expected to increase by 10% with effect from 01 August 2015.

6. The amount spent on advertising each month is calculated as a percentage of sales. The percentage for the period ended 30 June 2015 will be maintained in the next financial year.

7. Depreciation for the year ended 30 June 2015 was calculated as a percentage on the cost price of the equipment of R200 000. New equipment with a cost price R60 000 will be purchased on 01 July 2015.

8. Other operating expenses are spread evenly throughout the year and are expected to remain unchanged in the new financial year.

9. Repayments towards the loan will result in interest expense dropping by 10% per month. Interest expense for June 2018 is R3 000.