Question
Mr. Justin, a director of Kingston Berhad was concerned about the companys cash flow. Budgeted sales of the companys product for the next five months
Mr. Justin, a director of Kingston Berhad was concerned about the companys cash flow. Budgeted sales of the companys product for the next five months as follows:
MONTH | UNIT |
March | 20,000 |
April | 30,000 |
May | 37,000 |
June | 25,000 |
July | 15,000 |
Additional information:
The selling price is RM10 per unit
Company collects 48 percent of sales in the month of the sale,25 percent are collected in the month following sale, 22 percent are collected in the next two months and the remaining 5 percent are uncollectible.
Sales on February is RM308,000 and also unable to collect the remaining 5 percent of their credit sales
Mr Justin had arranged a bank loan of RM60,000 which will be credited to companys current account in May 2019
Purchases are equal 70 percent of the next month sales.44 percent of purchases are cash and the remaining balance will be paid in the following month.
Wages of RM12,000 per month are paid in the month in which they are earned. It is expected that the wages will be increased by 10 percent from 1 May 2019.
The rent will cost RM80,000 per annum payable three monthly in advance in January, April, July and December.
The dividend of RM12,000 for the year 2018 will be paid in June 2019. Other monthly fixed expenses are:
(a) Utilities RM5,500
(b) General expenses and administration RM20,000
(c) Depreciation and charges RM6,500
(d) Selling expenses is equal to 10 percent of sales each month
The company plans to purchase new equipment for RM50,000 in May which RM30,000 will finance by loan with a monthly payment of RM570 and RM70
of interest pay in the following month. The old equipment to be replaced can be sold for RM2,000
Cost of renovation is RM24,600 will be paid equally in May and June
Income taxes for the first half year are estimated at RM20,000 and will be paid in June.
Interest on accumulated loan is at 9 percent annual interest and paid in the following month
The cash balance at 31 March 2019 is RM42,000 and it would like to maintain minimum desired balance of RM48,000 per month
Mr. Justion has requested Mrs.Jaslina, accountant to prepare a cash budget for the second quarter ending June 2019. You are required to assist Mrs. Jaslina to prepare the requested cash budget.
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