Question

The following balances have been extracted from the accounting system of Buloon (Pty) Ltd at 31 March 2016, their most recent financial
year end. Mr Duffy, the owner, has approached you to assist him in planning for the next quarter ending on 30 June 2016.
			R
Share Capital			220 000
Loan BAO Bank			160 000
Furniture and Equipment at Cost price			240 000
Vehicles at Cost price			200 000
Inventory			10 000
Debtors			80 000
Creditors			20 600
Bank			3 000
Mr Duffy has also provided the following additional information pertaining to the next quarter :
1. The loan from BAO bank bears interest at 2% per month, payable monthly.
2. Sales are estimated at R125 000 per month and purchases of inventory amount to an estimated R28 000 per month.
3. Inventory on hand at the end of the next quarter is estimated at R8 500.
4. Depreciation on furniture and equipment is at 25% per annum and on vehicles at 20% per annum, based on the cost price.
6. Provision for taxation of R9 800 must be made.
7. Monthly expenses are as follows:
				R
	Rental			12 000
	Salaries and Wages			36 000
	Telephone			1 140
	Water and electricity			900
8. The following other expenses will be incurred during the next quarter:
				R
	Administration expenses			26 000	8 666.67
	Traveling expenses			16 000	5 333.33
9. Share capital consists of 50 000 shares.
Required
a) Prepare the budgeted income statement for Buloon Pty (Ltd) for the next quarter ending on 30 June 2016.										[12]
b) Mr Duffy is concerned about the low bank balance and is uncertain as to whether he will have enough cash available in his business during
the next month. He has also asked you to calculate the estimated cash available at the end of the next month (30 April 2016). The following
information pertains to the collections and payment patterns of the business:
	Sales:         If a customer pays cash, they receive a 7,5% discount, otherwise, they receive 30 days to pay. 5% of
	customers buying on credit end up defaulting in payments. 80% of sales are on credit.
	Payments: all payments are done in cash, except for purchases of inventory, which are paid 30 days after purchase.
	Cash discounts received on other payments total R3 000 per month. Taxation is only payable in August.									[11]
c) What could mr Duffy do should he experience a cash deficit during the next quarter?
										[2]

Answer 1