Question

QUESTION 5 REQUIRED Use the following information provided by Harvard Enterprises to prepare the: 5.1 Debtors Collection Schedule for March and April 2021. 5.2 Cash Budget for March and April 2021. Note: Where applicable, round off amounts to the nearest Rand. Use separate monetary columns for each month. 1. INFORMATION The following figures are estimated for 2021: January February March April Cash sales Credit sales Purchases Sales commission Wages 255 000 144 000 210 000 1 800 8 400 240 000 120 000 180 000 1 500 8 400 192 000 228 000 2 400 140 000 248 000 3 000 ? 2. Collections from credit sales are expected to be as follows: 30% in the month of the sale; 65% in the month following the sale. The remaining 5% is written off as bad debts. Eighty percent (80%) of the purchases are on credit and the balance is cash. Creditors are paid two months after the date of invoice. Harvard Enterprises will make an investment of R150 000 in fixed deposit on 01 March 2021. Interest of R1 000 per month is expected to be received from 31 March 2021. Rent expense amounts to R288 000 per annum and is payable monthly on the first day of each month. Wages will be increased by 10% on 01 March 2021 and will increase by a further 5% on 01 April 2021. A new machine is expected to be purchased for R25 000 cash during April 2021. Commission is paid to sales personnel in the month following the month in which it was earned. The expected bank balance on 28 February 2021 is R50 000 (favourable). 9.

Answer 1

5.1)
Debtors Collections Schedule for March and April 2021:
	March	April
From February Credit sales (R120,000*65/100)	R78,000
From March Credit sales (R192,000*30/100); (R192,000*65/100)	R57,600	R124,800
From April Credit sales (R140,000*30/100)		R42,000
Total Debtors Collections from Credit sales	R135,600	R166,800
5.2)
Cash Budget	March	April
Beginning balance	R50,000	R76,260
Add: Cash Receipts:
From Credit sales	R135,600	R166,800
From Cash sales	R288,000	R360,000
Interest Receivable	R1,000	R1,000
Total Cash Available (a)	R474,600	R604,060
Less: Cash Disbursements:
Cash purchases (R228,000*20/100); (R248,000*20/100)	R45,600	R49,600
Credit Purchases (R210,000*80/100); (R180,000*80/100)	R168,000	R144,000
Investment in fixed assets	R150,000	-
Rent Expense (R288,000/12 months)	R24,000	R24,000
Wages Expense (R8,400*110/100); (R9,240*105/100)	R9,240	R9,702
Purchase of New Machinery	-	R25,000
Commissions	R1,500	R2,400
Total Cash Disbursements (b)	R398,340	R254,702
Ending Cash Balance (a - b)	R76,260	R349,358