NURULUT Question 1 Prepare Rose Berhad's cash budget for the first 5 years. The actual and forecasted sales are as follows: Year 2017 2018 2019 2020 2021 2022 2023 2024 Sales (RM'000) 9,732 9, 876 10,200 13, 800 24,000 18,000 15,000 9,000 Source of information Actual Record Actual Record Sales Forecast Sales Forecast Sales Forecast Sales Forecast Sales Forecast Sales Forecast a) Based on the analysis of the past sales and collection records, the company's cash collections from sales are as follows: 25% of the sales are on a cash basis 50% is collected a year after the sale, and 25% is collected two years after the sale b) Besides the cash collection from sales, the company expects two other cash collections: RM300, 000 prepaid lease payment in the year 2023 and RM900, 000 collection of prepaid fire insurance premium payment in 2020. c) The production in 2019 is based on the sales forecast for 2020, and so forth. Therefore, the production expenses will include the cost of materials which averages about 35% of sales and are purchased in the year of their use in the production process, but total = payments are made a year later. d) Direct labor is estimated at 25% of sales, and the payment is made in the year of production e) Factory overhead is budgeted at RM1.2 million per year, and the payment is made in the year of production f) Selling and administrative costs are anticipated to be RM1.8 million per year, and the payment is made in the year of production g) Other cash expenditures include the following: Cash expenditures on the acquisition of new fixed assets and equipment: -RM375,000 in the year 2019 -RM525,000 in the year 2023 Cash expenditures on dividend payments: -RM300,000 in the year 2019,2021 and 2023 Amount of interest payment -RM675,000 in the year 2019, 2020 and 2021 Increase 5% from the last amount and will be paid in the year 2022 onwards. Payment of taxes estimated at RM225,000 in the year 2019 and will increase 10% every year. h) in preparing the cash budget from the year 2019 to 2023, it also assumed that the beginning cash balance in year 2019 is RM1.5 million. Besides, it is assumed that the minimum desired cash balance is RM1.5 million. The yearly cash deficit will indicate the amount of financing required to maintain the minimum yearly cash balance. 1/3 NURULUT Question 1 Prepare Rose Berhad's cash budget for the first 5 years. The actual and forecasted sales are as follows: Year 2017 2018 2019 2020 2021 2022 2023 2024 Sales (RM'000) 9,732 9, 876 10,200 13, 800 24,000 18,000 15,000 9,000 Source of information Actual Record Actual Record Sales Forecast Sales Forecast Sales Forecast Sales Forecast Sales Forecast Sales Forecast a) Based on the analysis of the past sales and collection records, the company's cash collections from sales are as follows: 25% of the sales are on a cash basis 50% is collected a year after the sale, and 25% is collected two years after the sale b) Besides the cash collection from sales, the company expects two other cash collections: RM300, 000 prepaid lease payment in the year 2023 and RM900, 000 collection of prepaid fire insurance premium payment in 2020. c) The production in 2019 is based on the sales forecast for 2020, and so forth. Therefore, the production expenses will include the cost of materials which averages about 35% of sales and are purchased in the year of their use in the production process, but total = payments are made a year later. d) Direct labor is estimated at 25% of sales, and the payment is made in the year of production e) Factory overhead is budgeted at RM1.2 million per year, and the payment is made in the year of production f) Selling and administrative costs are anticipated to be RM1.8 million per year, and the payment is made in the year of production g) Other cash expenditures include the following: Cash expenditures on the acquisition of new fixed assets and equipment: -RM375,000 in the year 2019 -RM525,000 in the year 2023 Cash expenditures on dividend payments: -RM300,000 in the year 2019,2021 and 2023 Amount of interest payment -RM675,000 in the year 2019, 2020 and 2021 Increase 5% from the last amount and will be paid in the year 2022 onwards. Payment of taxes estimated at RM225,000 in the year 2019 and will increase 10% every year. h) in preparing the cash budget from the year 2019 to 2023, it also assumed that the beginning cash balance in year 2019 is RM1.5 million. Besides, it is assumed that the minimum desired cash balance is RM1.5 million. The yearly cash deficit will indicate the amount of financing required to maintain the minimum yearly cash balance. 1/3