Question

REQUIRED

Use the following information provided by Milan Enterprises to prepare the:

4.1 Debtors Collection Schedule for January and February 2018. (4)

4.2 Cash Budget for January and February 2018. (16)

Note:

Where applicable, round off amounts to the nearest Rand.

INFORMATION

1. The bank balance of Milan Enterprises was R37 000 (unfavourable) on 31 December 2017.

2. Credit sales were forecasted as follows:

December 2017	January 2018	February 2018
R288 000	R270 000	R324 000

3. Credit sales usually make up 80% of the total sales. Cash sales make up the balance.

4. Credit sales are normally collected as follows:

* 20% in the month in which the transaction takes place and these customers are entitled to a 5% discount.

* 75% in the following month.

The rest is usually written off as bad debts.

5. Budgeted purchases of inventory are as follows:

December 2017		January 2018		February 2018
Total purchases	R250 000		R200 000		R230 000

6. The monthly salaries amount to R72 000. Salaries are expected to increase by 10% with effect from 01 February 2018 for those employees who presently make up 70% of the salary bill. The salaries of the remaining 30% are expected to increase by 7.5%.

7. Interest at 15% per annum on the loan balance is paid monthly. The loan balance on 31 December 2017 was R360 000 and a repayment of R100 000 will be made on 01 February 2018.

8. Part of the building is sublet to a tenant and rent is collected monthly. The lease agreement for the year ended 31 January 2018 reflected the rental as R86 400 per annum. The rental will increase by 12% with effect from 01 February 2018.

9. Other operating expenses amount to R18 000 per month. This amount excludes R3 000 for depreciation. Operating expenses are paid for in the month in which they are incurred.

Answer 1

4.1) Debtors collection schedule:
	January	February
Dec	216000			288000*0.75
Jan	54000	202500		270000*0.2
feb		64800		324000*0.2
total	270000	267300
4.2) Cash Budget :
	January	February
oBal	-37000	13200
cash sales	67500	81000		270000/4
Deb collec	270000	267300
total cash available	300500	361500
less: Disbursements:
purchase	200000	230000
salary	72000	78660		(72000*0.7*1.1)+(72000*0.3*1.075)
interest	4500	3250		360000*15%/12
rent recd.	-7200	-8064
operating exp	18000	18000
total disbursements	287300	321846
Excess of cash over disburse	13200	39654
Less: loan	0	0
Closing balance	13200	39654