Question

Glob and Dream Company provides the budgeting information for the first two quarters of the coming year 2020;

	First quarter	Second quarter
No of sales	unit 22,500	unit 20,800
Purchasing costs	RM 290,000	RM 350,000
Capital Additions (new machine)	RM 250,000	__--------___
Selling and Administrative expenses	RM 41,400	RM 46,400

The company expects to sell their units in the first quarter by RM 20 per unit and the price will increase by 25% in the second quarter. Based on the past experiences, the sales department in the company expects to sell about 35% of the total products for cash and only 80% of the sales on account will be collected in full in the first quarter and the remainder in the second quarter.

The company comes to an agreement with the suppliers that one-fourth of the total purchase in each quarter will be paid in the same quarter and the balance will be paid in the following quarter. Amongst the quarterly selling and administration expenses RM6,400 presents property taxes and depreciation. The property tax will be paid by the end of the third quarter however, RM40,000 part of income taxes will be paid on the second quarter. Of the remainder of the selling and administrative expenses; 50% will be paid in the quarter in which they are incurred and the other 50% will be paid in the following quarter. The company has a plan to expand its business and buy a new machine which will cost RM250,000 and it will be paid in the first

The beginning balances in the first quarter are Cash RM45000, Accounts receivable RM51000 and Account payable RM121,500 (RM102,000 for materials purchases and RM19,500 for selling and administrative expenses). Based on the company policy, it is important to maintain a minimum cash balance of RM 25,000 at the end of each quarter.

Required:

Prepare the cash budget of this company for the first and second quarter of the year 2020

Answer 1

Glob and Dream company Cash Budget for the First and second quarter of 2020
Quarters	Q1	Q2
	IN RM
A.Opening Cash balance	45000	17800
B.Total cash collections	442500	510900
C.Total cash disbursements	444700	305000
D.Net cash inflow =B-C	-2200	205900
E.Ending cash balance =A+D	42800	223700
Minimum cash balance	25000	25000
Cumulative surplus (deficit)	17800	198700
Workings for Cash collections and cash disbursements given below
Cash collections WORKINGS	Q1	Q2
	IN RM
Sales in units	22500	20800
Rate /unit in RM	20	25
Total sales	450000	520000
A.35% in cash sales	157500	182000
Credit sales	292500	338000
B.80% collected in the same quarter	234000	270400
C.20% in subsquent quareter		58500
D.Receipt from Accounts receivable	51000
Total cashcollections A+B+C+D	442500	510900
Cash Disbursements WORKINGS	Q1	Q2
	IN RM
Purchasing costs	290,000	350,000
A.25% in Same quarter	72500	87500
B.75% in next quarter		217500
C.Payment to accounts Accounts payable	121500
Selling and Administrative expense	41400	46400
Income tax included above in Selling and Administrative expenses	40000
Property taxes included in 2nd quarter selling and admin payable in 3rd quarter		6400
Balance selling administrative expenses	1400	40000
D.50% Payable in same Quarter	700
E.50% Payable in Next Quarter		700
Property taxes included in 2nd quarter selling and admin payable in 3rd quarter
F.Income taxes included in 1st quarter selling and admin payable in 3rd quarter		40000
G. Capital Additons (New Machine)	250000
Total cash Disbursements ( A+B+C+D+E)	444700	305000