Question 1

Syarikat Perama Jaya is a merchandising firm, selling school accessories. The company is planning of its cash needs for the third quarter of the year. The following information has been gathered to help you prepare the cash budget.

1. The forecasted income statements for July through October are as follows:

	July	August	September	October
	(RM)	(RM)	(RM)	(RM)
Sales	40,000	70,000	50,000	45,000
Cost of goods sold	24,000	42,000	30,000	27,000
Gross profit	16,000	28,000	20,000	18,000
Operating expenses:
Selling expenses	7,200	11,700	8,500	7,300
Administrative expenses	5,600	7,200	6,100	5,900
Total net operating expenses	12,800	18,900	14,600	13,200
Net income	3,200	9,100	5,400	4,800

1. About 25% of sales are in cash and the balances are credit sales.
2. Cash collections from credit sales are as follows:

• 40% in the month of sales
• 30% in the first month after sales
• 30% in the second month after sales

Total sales in May was RM30,000 and RM36,000 in June.

1. Merchandise purchases will be paid within 15 days. About 50% of the purchases are paid in the current month and another half will be paid in the following month. The ending balance of accounts payable on June 30 was RM11,700.
2. The desired ending inventory is equal to 75% of the cost of goods sold for the following month.
3. The company plans to purchase an equipment costing RM4,500 in July.
4. Dividends of RM35,000 will be declared and paid in September.
5. The cash balance on June 30 was RM25,000 and the company wants to have this balance maintained every month.
6. If necessary, the company will borrow money from banks and assume that bank loan and its repayment are in multiples of RM1,000. Loans are made at the beginning and repayments are at the end of month. Interest charge on loans is at 12% per year.

Required

a. Schedule of cash collections from sales (Please show the workings)