REQUIRED: Compile the cash budget for LFS for each of the four quarters of 2023. Use the template as provided in Annexure A as basis for completion of the test. Ignore the impact of VAT and normal income tax.
ICE TASK 4 – Budgeting Techniques
The University of Africa requires all second-year engineering students to have their own laptop computers to do practical work and tasks. During the last quarter of 2022, a private company, Laptops for Students Proprietary Limited (“LFS”) was established to supply laptops according to the specifications set by the university, at affordable prices. At that time, a loan of R800 000 was granted to LFS and the funds were deposited into the bank account. Prior to the receipt of the loan amount no cash transactions occurred.
The following additional information is available for LFS:
- According to estimates, 200 of the 400 second year engineering students will buy their laptops from LFS. There are two types of laptops which will be supplied, namely Exceptional at a selling price of R10 000 and Superior at a selling price of R8 000. Since the Exceptional laptop has a more powerful hard drive, it is expected that 60% of the 200 students will prefer to buy this laptop and the other 40% the Superior.
- The following quarterly sales
forecast for 2023 has been made:
|
Quarter |
% of the 200 students who will buy their laptops in the quarter |
|
1 |
65% |
|
2 |
20% |
|
3 |
15% |
|
4 |
- |
- All sales will be on strictly on a cash basis.
- During any quarter, purchases from suppliers are equal to 80% of the quarter’s estimated sales value. Suppliers are paid within 90 days after the end of the quarter of purchase.
- At the beginning of the first quarter, a delivery vehicle was bought on credit. The instalment is R11 000 per quarter.
Depreciation on the delivery vehicle amounts to R8 000 per quarter.
- Commission of 5% of the sales per quarter will be paid out in the relevant quarter.
- Interest on the R800 000 loan, which was granted in 2022, amounts to 16% per annum and is payable in equal amounts every quarter. The interest is not compounded. No capital repayment will occur during the 2023 year.
- In November 2023, new posters, and price lists for 2024 will be ordered from K-Printers. A deposit of R5 000 will be paid, while the balance of R6 000 will be paid on delivery in the first quarter of 2024.
REQUIRED:
Compile the
|
Description |
Quarter 1 |
Quarter 2 |
Quarter 3 |
Quarter 4 |
|
|
R |
R |
R |
R |
|
|
|
|
|
|
|
Bank balance - opening |
(1) |
(7) |
(11) |
(15) |
|
Add: |
|
|
|
|
|
Cash sales |
(2) |
(8) |
(12) |
(16) |
|
|
|
|
|
|
|
Deduct: |
|
|
|
|
|
Payments to creditors |
(3) |
(9) |
(13) |
(17) |
|
Instalment on delivery vehicle |
(4) |
(4) |
(4) |
(4) |
|
Commission |
(5) |
(10) |
(14) |
(17) |
|
Interest on loan |
(6) |
(6) |
(6) |
(6) |
|
K-Printers deposit |
- |
- |
- |
(18) |
|
Bank balance – closing |
(7) |
(11) |
(15) |
(19) |
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