Question

Question 4

BCD Computers Inc. is attempting to estimate its needs for funds during the months covering the third quarter of 20XX. Pertinent information is given as follows:

1. Past estimated future sales for 20XX are:

April RM80000 July RM90000

May RM95000 August       RM130000

June RM70000 September RM110000

October RM140000

2. Rent expense is RM2500 per month
3. A quarterly interest payment on RM100000 in 7% notes payable is to be paid during September 2020.
4. Wages and salaries estimated as follows:

July RM8000

August RM10000

September RM12000

5. Payments are made within the month in which the wages are earned.
6. 60% of the sales are for cash, with the remaining collected in the month following the sale.
7. BCD pays 80% of the sales price for the merchandise and makes payment in the same month in which the sales occur, although purchases are made in the month prior to the anticipated sales.
8. BCD plans to pay RM7500 in cash for a new forklift truck in July
9. Short term loan can be obtained in the end of each month at 13% annual interest with interest paid during each month for which the loan is outstanding.
10. BCD’s ending cash balance for June 30, 20XX is RM67000; the minimum balance the firm wishes to have in any month is RM35000

REQUIRED: Set up a cash budget for BCD for the quarter ended September 30, 20XX

Answer 1

Cash budget for BCD for the quarter ended september:

Sl.No	Month	June	July	August	September
i	Cash balance at the beginning of the month (Given & previous month xii)		67,000	59,000	56,500
ii	Sales (given)	70,000	90,000	130,000	110,000
iii	Cash sales (ii*60%)		54,000	78,000	66,000
iv	Collection from debtors (Previous month ii*40%)		28,000	36,000	52,000
v	Total cash receipts (iii+iv)		82,000	114,000	118,000
vi	Merchandise payment (ii*80%)		72,000	104,000	88,000
vii	Rent payment (given)		2,500	2,500	2,500
viii	Interest payment (given)				1,750
ix	Wages & salaries (given)		8,000	10,000	12,000
x	Investment - New forklift (given)		7,500
xi	Total cash payment (vi+vii+viii+ix+x)		90,000	116,500	104,250
xii	Cash balance at the end of the month (i+v-xi)		59,000	56,500	70,250

Since in all the 3 months, cash balance at the end of the month is more than 35,000. Hence no short term loan obtained during the whole quarter.