Question 2 (29 marks) Two friends are partners in a bookstore that sells popular fiction and non-fiction books as well as magazines and a wide range of office stationery and supplies. The bookstore is a recent start- up, and they intend to manage and operate the store in a professional and efficient manner with the objective of maintaining the viability of the business. One of their financial objectives is to implement effective cash planning. To achieve this objective, they need to implement a cash budget for the business. The partners have done an analysis of the business environment, the economic outlook for the year and the current performance of the business and then prepared a sales, purchases and expenditures forecast for the period January to March 2025. The partners approached you for assistance to prepare the cash budget and analyse and comment on the anticipated cash position of the business for the budget period. The partners provided you with the following information: recepts Projected total sales cash t Total other expenses' Projected total purchases credit total! January Rand February Rand March Rand 900 000 990 000 1 030 600 330 000 394 250 444 300 56 600 56 600 56 600 *Note: These expenses include all other committed and anticipated expenses but exclude the projected purchases expenditure, which are separately stated. Additional information: Cash sales constitutes 10% of the projected total sales. The credit policy of the business requires of customers who purchase on credit to repay their purchases as follows: 10% - One month after the month of purchase O 30% - Two months after the month of purchase O 60%- Three months after the month of purchase Cash purchases constitute 60% of monthly purchases. The company must repay 70% of purchases made on credit one month after the month of purchase and the balance two months after the month of purchase. All other monthly expenses are R56 600, R60 000 and R65 000 for January to March, respectively. The cash balance on 1 January 2025 is R120 000. The partners require of the business to maintain a monthly minimum cash balance of R60 000.

Question 2 (29 marks) Two friends are partners in a bookstore that sells popular fiction and non-fiction books as well as magazines and a wide range of office stationery and supplies. The bookstore is a recent start- up, and they intend to manage and operate the store in a professional and efficient manner with the objective of maintaining the viability of the business. One of their financial objectives is to implement effective cash planning. To achieve this objective, they need to implement a cash budget for the business. The partners have done an analysis of the business environment, the economic outlook for the year and the current performance of the business and then prepared a sales, purchases and expenditures forecast for the period January to March 2025. The partners approached you for assistance to prepare the cash budget and analyse and comment on the anticipated cash position of the business for the budget period. The partners provided you with the following information: recepts Projected total sales cash t Total other expenses' Projected total purchases credit total! January Rand February Rand March Rand 900 000 990 000 1 030 600 330 000 394 250 444 300 56 600 56 600 56 600 *Note: These expenses include all other committed and anticipated expenses but exclude the projected purchases expenditure, which are separately stated. Additional information: Cash sales constitutes 10% of the projected total sales. The credit policy of the business requires of customers who purchase on credit to repay their purchases as follows: 10% - One month after the month of purchase O 30% - Two months after the month of purchase O 60%- Three months after the month of purchase Cash purchases constitute 60% of monthly purchases. The company must repay 70% of purchases made on credit one month after the month of purchase and the balance two months after the month of purchase. All other monthly expenses are R56 600, R60 000 and R65 000 for January to March, respectively. The cash balance on 1 January 2025 is R120 000. The partners require of the business to maintain a monthly minimum cash balance of R60 000.

Century 21 Accounting Multicolumn Journal

11th Edition

ISBN:9781337679503

Author:Gilbertson

Publisher:Gilbertson

Chapter22: End-of-fiscal-period Work For A Corporation

Section: Chapter Questions

Problem 1CS

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