Reference no: EM133157390
Question - Cash Budget - On 1 December, TNC, a trading company, attempted to project its cash flow until 31 January. Repayment of a loan of R100 000 is due on the latter date. In September, this amount was borrowed to carry the company through the seasonal peak in November and December. The interest of 15% per annum is charged on the loan. The interest is payable on the last day ofeach month. An extract from the trial balance on 30 November reveals the following:
Sales are invoiced on the first day of each month. The sales terms are as follows:
There are no cash sales;
70% of the sales will be collected within 30 days on which 2% discount is granted;
20% of the sales will be collected within 60 days;
8% of the sales will be collected within 90 days; and
The rest is uncollectible.
The average selling price of the company's products is R100 per unit for the entire year. Actual and projected sales are:
October (actual) R180,000
November (actual) R250,000
December (estimated) R300,000
January (estimated) R150,000
February (estimated) R120,000
Total estimated for the year ending 30 June R1 500,000
50% of the monthly purchases are due and paid in the next month. The average unit purchase cost is R70 throughout the year.The target closing inventory is 500 units plus 25% of the next month's sales units. The opening inventory for November is 1 000 units. The total budgeted marketing, distribution and customer service costs are R400 000 for the year:
R150,000 of this amount is considered fixed, including depreciation of R30 000. The fixed costs will be incurred and paidevenly throughout the year.
The remainder of the fixed cost, as well as the variable costs, varies with sales.
Both fixed and variable marketing, distribution and customer service costs are paid as incurred.
The statement of financial position indicated a current asset, named bank and cash, to the value of R10,000 on 30 November.
Required - Prepare a cash budget for December and January and show all calculations.