Reference no: EM133107615
Question - Use the information provided below to prepare the following for Hemrock Ltd for August and September 2021. Use separate monetary columns for each month.
1. Debtors Collection Schedule
2. Cash Budget
INFORMATION - The following information was provided by Hemrock Ltd to assist in the preparation of its cash budget for August and September 2021:
1. The bank balance on 31 July 2021 is expected to be R45,000 (credit).
2. Sixty percent (60%) of all sales are for cash; the balance is on credit. Cash sales for June and July 2021 are expected to be R240,000 and R300,000 respectively. Cash sales are expected to increase by 5% per month while credit sales are expected to increase by 10% per month. Sixty percent (60%) of the credit sales is expected to be collected in the month of the sale for a cash discount of 2%. Thirty five percent (35%) is usually collected one month after the sale and the rest is written off as irrecoverable.
3. Hemrock Ltd sells its goods at cost plus 100%. The goods that are sold each month are replaced in the same month. All purchases are on credit and creditors are paid in the month after the purchase.
4. Salaries and wages are expected to cost R82,500 for September 2021 after a 10% increase takes effect from 01 September 2021.
5. Advertising expenses are expected to be 5% of the monthly sales, and are paid one month later.
6. Equipment with a cost price of R200,000 is expected to be purchased during August 2021. A deposit of 10% will be paid in August and the balance payable in six equal instalments commencing September 2021.
7. A long-term loan of R180,000 at 12% per annum interest is to be raised on 01 September 2021. Interest is payable quarterly in advance with the first interest payment to be made on 01 September 2021.
8. Other expenses, including depreciation of R4,000, are expected to amount to R46,000 each month and payments are made monthly.
9. An interim dividend of 6 cents per share is expected to be paid on 31 August 2021. The authorised share capital of Hemrock Ltd consists of 800,000 ordinary shares of which 500,000 shares were issued.
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