Question

The management of Sondela Limited has decided to prepare a cash budget for May and June 20X9. The following information is available:

	February	March	April	May	June
Sales: Cash	R250 600	R290 500	R305 700	R300 000	R320 000
Sales: Credit	R410 500	R500 000	R585 800	R580 000	R600 000
Purchases	R595 400	R684 700	R700 800	R690 000	R710 000
Salaries and wages	R65 800	R65 800	R65 800	R65 800	R65 800
Sundry expenses	R18 700	R19 400	R25 400	R20 500	R21 500

Additional information:

• Cash in respect of credit sales is collected as follows:

50% during the month following sale

30% during the second month after sale

15% during the third month after sale

5% is uncollectible

• The following discounts are allowed on sales

10% on cash sales

5% on credit sales; if accounts are settled within the month following sales.

• All salaries, wages and sundry expenses are paid in cash.
• Sundry expenses include depreciation of R3 000 per month.
• 60% of all purchases are on credit and are paid during the month following that of the transaction. The rest represent cash purchases.
• On the 30^th June a dividend of R5 000 was declared.
• The cash balance on the 30^th April was R10 500. Sondela Limited always keeps a minimum cash balance of R10 000.
• Any shortages are financed with bank loans at 15% interest per annum, payable monthly.

REQUIRED

The management of Sondela Limited has decided to prepare a cash budget for May and June 20X9. The following information is available:

	February	March	April	May	June
Sales: Cash	R250 600	R290 500	R305 700	R300 000	R320 000
Sales: Credit	R410 500	R500 000	R585 800	R580 000	R600 000
Purchases	R595 400	R684 700	R700 800	R690 000	R710 000
Salaries and wages	R65 800	R65 800	R65 800	R65 800	R65 800
Sundry expenses	R18 700	R19 400	R25 400	R20 500	R21 500

Additional information:

• Cash in respect of credit sales is collected as follows:

50% during the month following sale

30% during the second month after sale

15% during the third month after sale

5% is uncollectible

• The following discounts are allowed on sales

10% on cash sales

5% on credit sales; if accounts are settled within the month following sales.

• All salaries, wages and sundry expenses are paid in cash.
• Sundry expenses include depreciation of R3 000 per month.
• 60% of all purchases are on credit and are paid during the month following that of the transaction. The rest represent cash purchases.
• On the 30^th June a dividend of R5 000 was declared.
• The cash balance on the 30^th April was R10 500. Sondela Limited always keeps a minimum cash balance of R10 000.
• Any shortages are financed with bank loans at 15% interest per annum, payable monthly.

REQUIRED

Prepare a cash budget for May and June 20X9.

Prepare a cash budget for May and June 20X9.

Answer 1

Sondela Limited Cash budget Calculation June May June May 10,500.00 759,830.00 770,330.00 10,000.00 814,240.00 824,240.00 696,480.00 65,800.00 17,500.00 =20,500-3000 =21,500-3000 Cash balance, beginning Add: Cash collections Total cash available Less: Cash disbursements Purchases Salaries and wages Sundry expenses Dividends Total cash disbursements Excess (deficiency) of cash Financing Borrowings Repayments Interest at 15% per annum Total financing Cash balance, ending 698,000.00 65,800.00 18,500.00 5,000.00 787,300.00 36,940.00 779,780.00 (9,450.00) 19,450.00 =10,000+9,450 =19,450*15%*1/12 (19,450.00) (243.13) (19,693.13) 17,246.88 19,450.00 10,000.00 Assuming bank loans are taken at the end of month, so no interest charged in May Expected cash collections June 288,000.00 June =320,000*90% Cash sales Feb sales Mar sales Apr sales May sales Total collections May 270,000.00 61,575.00 150,000.00 278,255.00 May =300,000*90% -410,500*15% =500,000*30% =585,800*50%*95% 75,000.00 175,740.00 275,500.00 814,240.00 =500,000*15% =585,800*30% =580,000*50%*95% 759,830.00 June =710,000*40% Expected cash disbursements for Purchases May Cash Purchases 276,000.00 Apr Purchases 420,480.00 May Purchases Total cash disbursements 696,480.00 June | May 284,000.00 =690,000*40% =700,800*60% 414,000.00 698,000.00 =690,000*60%