Question 1 Ray, a professional engineer with many years of experience, is considering opening a new branch of his engineering firm commencing 1 January 2009. This new branch will focus on sales of component parts to possible customers. He is aware that money will be a problem and has asked you to help him to prepare a cash budget over the next three months from January to March 2009. He provides you with the following actions he proposes to take: The business will commence with $90,000 cash, made up of his personal savings and a personal loan from Central Bank. (a) In January, he will need to pay a rental deposit of $50,000 and a sum of $3,000 per month for the rental of double storey building. (b) In February, he is expected to purchase plant and machinery at the cost of $60,000 which has an estimated useful life of 10 years. Depreciation charge per annum will be $6,000. Only half of the cost will be paid in the month of purchase, while the balance will be paid equally over the next two months. (c) Four staff will be employed and each of them will be paid $1,000 per month on the last day of the month. (d) Purchases of raw materials will be made on credit and payment will be made one month after purchasing. Estimated purchases are as follows: January $25,000 February $20,000 March April $28,000 $22,000 (e) A second-hand motor van costing $60,000 will be purchased and three equal payments will be made in February, March and April. (f) Estimated sales for component parts in units are: January 5,000 February 6,000 March 4,000 April 5,500 50% of the units will be sold for $20 each and cash will be received in the month of sales, while another 50% will be sold at $10 each, receivable one month after sales. (g) Ray will withdraw $1,500 per month as his allowance. (h) Advertising will be $2,000 per month in the first month and $500 per month thereafter, paid in the month incurred. Required: Prepare a cash budget over the next three months from January to March 2009. Question 2