QUESTION 1 FORECASTING / BUDGETS (20 Marks)

ITALIAN BOY, sells exclusive men's wear. The proprietor has supplied you with the following information.

REQUIRED:

1.1. The Debtors Collection Schedule for the period, 01 July to 31 August 2017. (6 marks)

1.2. The Cash Budget for the period 01 July to 31 August 2017. (14 marks)

NB: copy the format given below in your answer book

INFORMATION:

1. Actual and projected amounts:

Details ACTUAL PROJECTIONS May 2017 June 2017 July 2017 August 2017 Total sales 400 000 430 000 480 000 540 000 Total Purchases 250 000 268 700 300 000 337 500 Rent income 25 000 25 0000 ? ? Salaries 45 000 45 000 ? ? 

2. Sales:

• Credit sale amount to 40% of the total sales.
• Credit sales are collected as follows from debtors :

50% in the month of sales less 6% discount allowed for prompt payment.

30% in the month after sales.

20% in the second month after sales.

3. Purchases:

• All purchases are on credit.
• Creditors are paid in full in the month following the purchase and earning an 8% discount for early settlement.

4. The monthly rent income will increase by 12% with effect from 01 July 2017.

5. The business has R150 000 invested in fixed deposit. A fixed deposit of R60 000 will be maturing on

01 August 2017. Fixed deposit earns 10% p.a. interest which is received monthly.

6. The business has 6 employees on equal pay. However one employee will be relocating to Gauteng on 31 July 2017.

7. The proprietor has decided to give a donation of R100 000 on his birthday, 15 July 2017, to the local high school

where he matriculated, for the building of new classrooms.

8. Additional office equipment costing R18 000 will be purchased in July. Half the amount will be paid immediately and

the balance in six equal monthly instalments starting in August 2017.

9. The expected bank balance on 01 July 2017 is an overdraft of R136 156.

Copy the format in your answer booklet and complete the question.

1.1

DEBTORS COLLECTION SCHEDULE FOR THE PERIOD 01 July to 31 August 2017

Months Credit Sales Budget Period  July August May _________ ______ _________ June _________ ______ _________ July _________ ______ _________ August _________ ______ _________ Total expected receipts ______ _________ 

1.2

CASH BUDGET FOR THE PERIOD 01 MAY TO 30 JUNE 2017..

 July August 

Expected Receipts :_________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

 Total Receipts ______ _________ 

Expected Payments :_______________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

 Total Payments ______ _________ 

Excess Receipts / ( Payments ) ______ _________ Bank balance at beginning of month ______ _________ Bank balance at end of month (_____) (________) 

QUESTION 2 (20 MARKS)

The trial balance, adjustments and additional information given below were extracted from the

accounting records of Leo Traders on 29 February 2016, the end of the financial year.

REQUIRED

Use the trial balance, adjustments and additional information to prepare the Statement of

Comprehensive Income of Leo Traders for the year ended 29 February 2016. Use the following

format:

Statement of Comprehensive Income format

Sales Cost of sales Gross profit Other operating income Gross operating income Operating expenses Operating profit Interest income Interest expense Net profit for the year 

INFORMATION

Leo Traders

PRE-ADJUSTMENT TRIAL BALANCE AS AT 29 FEBRUARY 2016

 Debit (R) Credit (R) Balance sheet accounts section Capital 660 120 Drawings 54 540 Land and buildings 502 500 Vehicles at cost 369 000 Equipment at cost 264 000 Accumulated depreciation on vehicles 211 000 Accumulated depreciation on equipment 147 800 Fixed deposit: Win Bank (10% p.a.) 79 200 Trading inventory 60 000 Debtors control 70 000 Provision for bad debts 4 000 Bank 50 360 Cash float 1 000 Creditors control 73 580 Mortgage loan: Win Bank (16% p.a.) 132 000 

Nominal accounts section

Sales 830 600 Cost of sales 317 600 Sales returns 5 000 Salaries and wages 235 000 Bad debts 7 500 Stationery 2 000 Rates and taxes 23 000 Motor expenses 12 800 Marketing expenses 9 400 Telephone 17 800 Electricity and water 26 700 Bank charges 3 300 Insurance 2 600 Interest on mortgage loan 20 500 Interest on fixed deposit 5 900 Rent income 68 600 

2 133 800 2 133 800

ADJUSTMENTS AND ADDITIONAL INFORMATION

1. Stationery, cost R200, was taken by the proprietor for personal use. No entry has been made for this.

2. Physical stocktaking on 29 February 2016 showed the following inventories on hand:

Trading inventory

Stationery

R58 000

R100

3. Write off the account of debtor, R. Smit, R1 000.

4. The provision for bad debts must be decreased by R500.

5. Rent income amounts to R4 900 per month. Make the necessary adjustment.

6. The water and electricity account of R2300.00 for February 2013 has been paid, but the payment was

erroneously posted to the telephone account.

7. Rates and taxes include an amount of R2 400 that was paid for the next accounting period.

8. An amount of R100 appeared in the February 2013 bank statement for cash deposit fees. This amount

was not recorded by the bookkeeper.

9. The investment in fixed deposit was made on 01 March 2015. Provide for the outstanding interest.

10. The loan from Win Bank was obtained on 01 March 2015. Provide for outstanding interest of R620.

11. Provide for depreciation as follows:

* On equipment at 10% per year on cost.

* On vehicles at 20% per year using the diminishing balance method.