Class example 2 – budgets

The following budget information relates to Cell A for the three months to 31
March:

 Budgeted statement of comprehensive incomes:

Month ending 31 Jan. 28 Feb. 31 Mar.
R(000) R(000) R(000)
Credit sales 4 000 6 000 5 000
Cost of sales 2 400 3 600 3 000
Gross profit 1 600 2 400 2 000

Depreciation 200 200 200

Other expenses 900 1 000 1 200
(1 100) (1 200) (1 400)
Net profit 500 1 200 600

 Extracts from budgeted Statement of Financial Positions:

Balances at: 31 Dec. 31 Jan. 28 Feb. 31 Mar.
R(000) R(000) R(000) R(000)
Current assets
Inventories 200 240 300 300
Accounts receivable 400 600 700 800
Short-term investments 120 120 120 120

Current liabilities
Accounts payable 220 360 320 300
Accruals 100 100 100 100
Taxation 300 ? ? ?
Dividends 400 400 400 400

 The bank balance on 1 January was expected to be R30 000.

You are required to:

1. Prepare the expected cash outflows for January, February and March.
Ignore Taxation.
2. Calculate the tax paid if the tax liability was:
a) R200 000 on 31 January,
b) And then increased to R400 000 on 28 February.