Question

Kwang Hee Company has been engaged in the process of forecasting its financing needs over the next quarter and has made the following forecasts of planned cash receipts and disbursements:

a) Historical and predicted sales:

April RM 80,000 August RM 130,000
May RM 100,000 September RM 120,000
June RM 120,000 October RM 100,000
July RM 130,000 November RM 110,000

b) The collection of the sales receipt are as follows:
i. 50% is collected in the month of sales
ii. 35% is collected one month after sales
iii. 10% is collected two month after sales
iv. 5% is uncollected

c) Merchandise is purchased two month before the sales month and is paid 1 month after it was sold. Purchases equal 80% of sales.

d) Monthly rent expenses of RM 3,000

e) Wages and salaries for the coming months are estimated as follows:

July RM 18,000
August RM 18,000

September RM 16,000

f) Utilities for the firm average 2% of sales and are paid in the month of their incurrence.

g) RM 1,000 tax payments are to be made in the second month of each quarter.

h) A 9% annual interest rate on a RM 400,000 term loan will be paid monthly.

i) Beginning cash balance for the budget period is RM 5,000 and its minimum desired balance is RM 10,000.

Answer 1

	Forecasting for Quarter ended on September
		April	May	June	July	August	September
(a)	Sales	80000	100000	120000	130000	130000	120000
(b)	Cash Received
	(i) 50% in the month of sales	40000	50000	60000	65000	65000	60000
	(ii) 35% collected one month after sales		28000	35000	42000	45500	45500
	(iii)10% collected 2 months after sales			8000	10000	12000	13000
	(iv) Provision for bad debts	4000	5000	6000	6500	6500	6000
c)	Purchases	96000	104000	104000	96000	80000	88000
	Cash paid for Purchases	NA	NA	NA	96000	104000	104000
(d)	Rent	3000	3000	3000	3000	3000	3000
e)	Wages and salaries	NA	NA	NA	18000	18000	16000
(f)	Utilities				2600	2600	2400
(g)	Tax payment		1000			1000
(h)	Interest Payment	3000	3000	3000	3000	3000	3000
	Position of cash at the end of each month				-5600	-8100	-9900
	Opening cash				5000	10000	10000
	Cash balance				-600	1900	100
	Working capital Requuirement				10600	8100	9900
	Minimum desired balance				10000	10000	10000