Cash point Ltd prepares quarterly budget as part of the budgetary control system. During the last quarter ending 31st March 2020 the following information is accumulated concerning operations for the next quarter ending 30th June 2020.
Sales which are all on credit will amount to Kshs 400,000 in April 2020 the same level as in February and March 2020, increasing at 10% per month for the next six months and thereafter at 5%
Sales credit terms are strictly 30 days after-sales. Past experience shows that this policy is effective in 75% of cases. Of the remainder, 20% will pay in subsequent month and 5% never pay up until after 180 days.
Inventories are maintained at equivalent of 15 days sales. On 31st March 2020 the inventory level is estimated at Kshs125,000.
Goods are bought and paid for within 30 days. During March 2020, merchandise purchases amounted to Kshs 250,000
The unit selling price is Kshs 100 with a profit margin of 40% on sales.
The cash balance on 31st March 2020 is Kshs 87,800.
Projected payment for expenses and other items are as follows
April
May
June
Kshs
Kshs
Kshs
Salaries
45,000
45,000
54,000
Travelling
9,000
9,000
12,000
Office Expenses
15,000
15,000
18,000
Utilities
12,000
12,000
12,000
Depreciation
7,500
7,500
7,500
Drawings
30,000
16,000
16,000
Other payments are to be made as follows:
Half yearly rent at the rate of Kshs 8,000 per month will be paid in April and the next instalment in October 2020.
Income tax amounting to Kshs 20,000 will be paid in June 2020 being installment tax for 2020.
Some computer equipment will be acquired in April 2020 but paid for in May 2020 at a price of Ksh 90,000
Required
A cash budget for the three months April, May, and June 2020
Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.
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