Question

Prontor Limited is ready to prepare the master budget for the year of 2019. The company uses full absorption costing system. The Financial Position as at 31st December 2018 is as follows:

Financial Position as at 31st December 2018

Fixed Assets		Capital
Land and building	100,000	100,000 ordinary shares At RM1 each    100,000
Plant and machinery                 20,000		General Reserve                             12,850
Less: Accumulated depreciation        6,000	14,000	112,850
Current assets Debtors                        10,000 Bank                           10,000 Inventory : Materials              4,000          Finished goods           7,850	114,000                      31,850	Current liabilities Creditors for materials                    20,000 Other creditors                               13,000

                                                                                            145,850                                                  145,850

Sales and inventory data:

East Malaysia          :          2,000 units of Product Z and 2,000 units of Product Y.

       West Malaysia                 :      6,000 units of Product Z and 5,000 units of Product Y.

Selling prices          :   Product Z at $12 per unit            

                                  Product Y at $20 per unit

Planned ending inventory :         400 units of Product Z and 700 units of Product Y

Beginning inventory      : 200 units of Product Z and 350 units of Product Y

   Additional information for Prontor Limited is as follows:

Direct Materials	M121	M122
Beginning inventory (units)                            1,000      Planned ending inventory (units)                  2,000             Cost per unit                                 $1 Each unit of Product Z requires 2 units of M 121, 1 unit of M 122. Each unit of Product Y requires 2 units of M 121, 2 units of M 122.		1,500     3,000      $2

Factory overhead is expected to be as follows: $75,600                                                                    

Selling and Administration expenses are budgeted as below $18,000
The cash flows of the company are projected as below :

	Quarters
	1st	2nd	3rd	4th
Receipts from debtors ($)	20,000	40,000	42,000	68,000
Payments: ($)
Material purchase	20,000	20,000	15,000	5,000
Wages	7,000	7,000	7,000	7,350
Other costs	25,000	15,000	20,000	25,000
Plant purchase	-	-	-	5,000

Prontor Limited has an arrangement with its bankers that it can borrow money in multiples of $1,000, and pay interest at 12% per annum. Loans are borrowed on the first day of the quarters and repayable on the last day of the quarters in question. Interest is to be paid on repayment of loan.

Calculate

1. Cash Budget
2.   Budgeted Statement of Comprehensive Income for the year ending 31^st December 2019.
3.   Projected Financial Position as at 31^st December 2019.

Answer 1

1)

Cash Budget				( in $)
Particulars	Q1	Q2	Q3	Q4
Opening Balance	10,000	310	530	720
Receipts of Debtors	20,000	40,000	42,000	68,000
Deficit - Loan	23,000	3,000	1,000
Total Receipts	53,000	43,310	43,530	68,720
Payments
Material purchase	20,000	20,000	15,000	5,000
Wages	7,000	7,000	7,000	7,350
Other costs	25,000	15,000	20,000	25,000
Plant purchase	-	-	-	5,000
Repayment of Loan				25,000
Interest	690	780	810	780
Total Payments	52,690	42,780	42,810	68,130
Closing Balance	310	530	720	590

2)

Comprehensive Income Statement as on 31st Dec, 2019
Particulars	Amount	Amount
Sales
Product Z	96000
Product Y	140000	236000
Purchase
M121 31100 units @ $1	31100
M122 22900 units @ $2	45800
Wages	28350
Factory Overhead	75600
Selling and Distribution	18000
Interest	3060	201910
Opening Stock	11850
Closing Stock	15340	3490
Comprehensive income		37580

3)

Projected Financial Position as on 31st Dec, 2019
Assets	Amount	Liabilities	Amount
Land and Building	100000	Capital	100000
Plant and Machine	20000	General Reserve	50430
Addition	5000	Loan amount	2000
Accumulated Depreciation	-6000
	19000	Current Liabilities
Current assets		Creditors for Materials	45500
Debtors	76000	Other Creditors	13000
Bank	590
Inventory
Materials	8000
Finished Goods	7340
	210930		210930

Workings

		Debtors
Particulars	Amount	Particulars	Amount
Opening	10000	Q1 Collection	20000
		Q2 Collection	40000
Sales	236000	Q3 Collection	42000
		Q4 Collection	68000
		Balance	76000
	246000		246000

Sales
	Product Z	Product Y
Units	8000	7000
SP	12	20
Sales	96000	140000

Particular	Units	Amount	Units	Amount	Total
Closing Materials	2000	2000	3000	6000	8000

Finished Goods
Z	Units	Rate per unit	Amount
M121	800	1	800
M122	400	2	800
Factory Overheads	1200	1.4	1680
Total Z			3280
Y
M121	700	1	700
M122	700	2	1400
Factory Overheads	1400	1.4	1960
Total Y			4060
Total			7340