ACC1511 MANAGEMENT ACCOUNTING FUNDAMENTALS CASH BUDGET EXERCISES Question 1 The accountant of DJ Herbs, a medium size company, approached the company's bank late in the current year seeking short-lerm financing, and was told that money was very sght and that any borrowing over the next year would have to be supported by a detailed statement of cash colections and disbursements. The accountant also was tokld that it would be very helpful to the bank if borrowers would indicate the quarters in which they would be needing funds, as well as the amounts that would be neaded, and the quarters in which repayments could be made Because the accountant is unsure as to the particular quarters in which bank financing will be needed, he has assembled the folowing information to assist in preparing a detailed cash budget for next year a Sales and merchandise purchases are made cn account. The account assistant has gathered al relevant intomation as summarized in the folowing table: Quarter 1 Quarter 2 Quarter 3 RM400,000 RM365,000 Quarter 4 RM300,000 RM200,000 RM290.000 RM120.000 Sales Cash Collections Cash Disbursements RM200,000 RM196,000 RM120,000 RM261,000 RM176,000 RM200,000 b. The company wil pay 5% sales commission quarterly to al salespersons as part of the remuneration package. Seling and administranive expenses are budgeted at RM50,000 per quarter. Ot the amount, RM20,000 each quarter is deprecianon d. The company's policy is to declare and pay dividends in the last quarter of every year. The expected dividends is RM50,000 . Land purchases of RM46,000 tor the new factory will be made in the first quarter. The purchase wil be for cash t. Salary expenses are esimated at RM40,000 per quarter. The company pays RM30,000 for insurance annualy. The payment will be made in the last quarter h. The company is committed in helping the orphanages and is planning to donste RM20.000 in the last quarter. iThe cash balance at the end of the current year is RM10,000. The accountant feels that maintaining a minimum RM30,000 cash balance in evary quarter for the coming year is necessary to sustain the operation The company has no outstanding loan at present k The company has an agreement on overdraft facity with a local bank up to a total of RM100,000, with an interest rate of 5 % per year, with bomowing taking place on the first day of the month and repayment cccurring on the last day of the month. Interest is paid when the loan is repaid Required: Prepare a cash budget for DJ Herbs, by guarter and in total, for next year