Question

One of your duty as employee of Wanlap Company is to prepare the cash budget for the
period from 1 January to 30 June 2020.

Use the following information to assist you in preparing that budget:

-80 per cent are credit sales; 80 per cent of credit sales will be collected in the next
month; 15 per cent will be collected 60 days after sales and 4 per cent more will be
collected 90 days after sales. The company had to bear one per cent of credit sales
as uncollectable debt (bad debt).

-Purchases made every month are 65 per cent of sales forecasted for the next
month. Payment for these purchases will only be made one month after purchase.

-The company intends to maintain a minimum cash balance of RM300,000. The
cash balance on 1 January is RM300,000.

-The company expects the delivery of a new machine in the month of April.
Payment of RM400,000 will be made after delivery had been done.

-Payment for tax of RM500,000 will be made in the month of March and June.

-Rental of RM100,000 per month. Other cash expenditure is 3 per cent of sales.

-The depreciation expenses are RM150,000 per month.

-Labor expenses are 10 per cent of sales for the next month.

-The company’s board of directors intends to maintain the dividend payment of
RM450,000 that will be made in the month of June.

-Sales in the month of October are RM3,000,000 and RM2,000,000 in the months
of November and December 2019 respectively.

-Sales forecast for the first seven months in the year 2020 is as follows:

Months	Sales
January February March April May June July	3,000,000 5,000,000 5,000,000 6,000,000 3,000,000 2,000,000 2,000,000

-The company will make interest payments in the month of June for RM310,000.

Prepare the following:
(A)Forecasted Cash Received schedule.

(B)Forecasted Monthly Cash Payment schedule.

(C) Cash Budget from January until 30 June 2020.

Answer 1

A.

Cash Received Schedule
	Jan	Feb	Mar	Apr	May	Jun
Cash Sales	600,000	1,000,000	1,000,000	1,200,000	600,000	400,000
Collection of credit sale
First month after sale	1,280,000	1,920,000	3,200,000	3,200,000	3,840,000	1,920,000
Second month after sale	240,000	240,000	360,000	600,000	600,000	720,000
Third month after sale	96,000	64,000	64,000	96,000	160,000	160,000
Total Cash Receipts	2,216,000	3,224,000	4,624,000	5,096,000	5,200,000	3,200,000

B.

Cash Payments Schedule
	Jan	Feb	Mar	Apr	May	Jun
Cash disbursements for
Purchase of merchandise	1,950,000	3,250,000	3,250,000	3,900,000	1,950,000	1,300,000
Machine	0	0	0	400,000	0	0
Tax	0	0	500,000	0	0	500,000
Rental	100,000	100,000	100,000	100,000	100,000	100,000
Other cash expenses	90,000	150,000	150,000	180,000	90,000	60,000
Labor expenses	500,000	500,000	600,000	300,000	200,000	200,000
Dividends	0	0	0	0	0	450,000
Interest	0	0	0	0	0	310,000
Total Cash Payments	2,640,000	4,000,000	4,600,000	4,880,000	2,340,000	2,920,000

C.

Cash Budget
	Jan	Feb	Mar	Apr	May	Jun
Beginning cash balance	300,000	300,000	300,000	324,000	540,000	2,200,000
Add: Cash Receipts	2,216,000	3,224,000	4,624,000	5,096,000	5,200,000	3,200,000
Total Cash Available	2,516,000	3,524,000	4,924,000	5,420,000	5,740,000	5,400,000
Less: Cash Payments	2,640,000	4,000,000	4,600,000	4,880,000	2,340,000	2,920,000
Surplus ( Deficincy)	(124,000)	(476,000)	324,000	540,000	3,400,000	2,480,000
Borrowing ( Repayment)	424,000	776,000	0	0	(1,200,000)	0
Ending cash balance	300,000	300,000	324,000	540,000	2,200,000	2,480,000