Healthcross Products Ltd commenced business on 1 May 2000. The company ahs approached their bankers for overdraft facilities. The bank has in turn demanded a cash flow statement in support of their request. The following information ahs been assembled for the purpose: Projections

2000

Sales Sh ‘000’

Purchases (units)

May

200

5,000

June

200

5,000

July

380

9,000

August

560

20,000

September

620

12,000

It is established that 60% of the customers pay within the month of sales, 20% the month following the month of sale and 15% the month following while the balance is normally uncollectible.

The current purchase price of Sh 20 per unit is expected to rise by 20% on 1 July and by another 25% on 1 August. Disbursements to suppliers are made in full in the month following the month of purchase.

The company anticipates paying general and administration expenses at the rate of Sh 80,000 a month payable as incurred while obligation under a medium term lease payable at the commencement of each quarter amount to Sh 50,000 per month.

Corporation tax of Sh 150,000 is due in September while Sh 200,000 will be paid to a supplier for purchase of an asset in the same month.

The bank balance on 30 June 2000 is expected to be Sh 50,000 while the company intends to maintain a minimum monthly balance of Sh 100,000. Financing attracts interest at the rate of 24% per annum debited in the month following the month of utilizing the overdraft.

Required:

a) Sales/debtors’ collection schedule on a monthly basis for the months of May to September 2000. (9 marks)

b) Purchases schedule on a monthly basis for the months of May to September 2000.

(5 marks)

c) In columnar form, cash flow statement for the three months July to September 2000 on a monthly basis showing financing required, if any. (16 marks)

(Total: 30 marks)