Your line manager has called you in and asked you to prepare a cash flow forecast for the new ‘Edible Gardens’ for the next three months. Edible Gardens will commence trading on 1 January 2023.
You need to complete a cash flow forecast for the months of January, February and March 2023. The bank balance is a positive amount of R200 000 on the 1 January 2023.
Relevant forecast sales information is outlined below. Cash sales are collected immediately, and 80% of credit sales is collected from debtors within 30 days, the balance of 20% is collected the month thereafter.

Required:

1 Prepare the cash budget for Edible Gardens for the months of January, February and March 2023. Show all workings.

2 Edible Gardens has been considering leasing certain of its assets and is interested in the impact this will have on the financial statements.

Explain the difference between an operating lease and a finance lease in terms of their respective impacts on the financial statements – i.e., the profit, assets and liabilities
 

Transcribed Image Text:

Rands Cash sales Credit sales Total sales Month Rands January Forecast January (forecast) February (forecast) March (forecast) 180 000 120 000 300 000 Information relating to expenditure is below: Purchases February Forecast 130 000 140 000 150 000 Electricity & water 14 000 15 000 16 000 216 000 144 000 360 000 Salaries March Forecast 100 000 105 000 110 000 234 000 156 000 390 000 Overheads 35 000 38 000 33 000 Additional information: 1. Purchases are settled for cash in the month of purchase. 2. Salaries are paid in the month incurred. A special staff bonus of R40 000 will be paid in Mid-March. The bonus is not included in the above figures. 3. Electricity is paid the month after usage as shown above. 4. Overheads include R10 000 depreciation and are settled in the month in which they arise. 5. Edible Gardens aims to purchase a tunnel in which to grow the edible plants for R150 000. Two thirds of the price will be settled in January and the balance in February 2023. Rands Cash sales Credit sales Total sales Month Rands January Forecast January (forecast) February (forecast) March (forecast) 180 000 120 000 300 000 Information relating to expenditure is below: Purchases February Forecast 130 000 140 000 150 000 Electricity & water 14 000 15 000 16 000 216 000 144 000 360 000 Salaries March Forecast 100 000 105 000 110 000 234 000 156 000 390 000 Overheads 35 000 38 000 33 000 Additional information: 1. Purchases are settled for cash in the month of purchase. 2. Salaries are paid in the month incurred. A special staff bonus of R40 000 will be paid in Mid-March. The bonus is not included in the above figures. 3. Electricity is paid the month after usage as shown above. 4. Overheads include R10 000 depreciation and are settled in the month in which they arise. 5. Edible Gardens aims to purchase a tunnel in which to grow the edible plants for R150 000. Two thirds of the price will be settled in January and the balance in February 2023.

Answer rating: 100% (QA)

To prepare the cash flow forecast for Edible Gardens for the months of January February and March 2023 we need to calculate the inflows and outflows for each month based on the provided information St... View the full answer