Reference no: EM133061185

Question - Your friend James saw an opportunity to start a new companycalled Give Me Power (Pty)Ltd. Considering load shedding and constant increases in fuel prices, James will buy and resell specialised generators that use solar power to generate electrical energy.

James asked you to help him preparea cash budget and to calculate the closing cash balance as these contribute to the day-to-day financial management and the making of strategic decisions.

You received the following information:

	December 2021	January 2022	February 2022	March 2022
Sales forecast	800,000	820,000	860,000	880,000
Purchases forecast	480,000	510,000	650,000	680,000

James expects cash sales to be 40% of the total sales. The remaining balance will be received as follows: 50% in the month following the cash sales, 30% in the month thereafter and 20% in the third month.

James expects purchases to be 20% cash and to pay his creditors 60% in the first month following the purchases and 40% in the month thereafter.

Other operating information:

James will need stationery and a computer in January 2022 for a total amount of R50,000.

Salaries and wages for December and January will be R120,000 per month, with an increase of 10% from February 2022.

Monthly rental for the shop is an agreed amount of R40,000 per month.

James has R1,000,000 available to start this business in December 2021. This will be the first month of trade for the company.

Required - Calculate the closing cash balance for March 2022 by preparing a cash budget for Give Me Power (Pty) Ltd.