The directors of Kingston & Co. were concerned about the company's cash flow. They requested their accountant to prepare a cash budget for the three months ending 30 June 2020. The expected purchases and sales for the first half of year 2020 are as follows: Month January February March April May June Purchases (RM) 125,500 145,500 130,550 135,000 155,500 115,500 Sales (RM) 185,000 165,000 185,000 275,000 295,000 245,000 Credit sales accounted for 75 percent of the total sales, the remaining 25 percent are cash sales. 50 percent of the credit sales will be collected one month after the sales and 48 percent will be collected two months after sales. The balance 2 percent of the credit sales are never collected. The firm has an opportunity to receive RM1,500 as a royalty every month. 40 percent of the purchase price is paid in cash. 35 percent of purchase price will be paid one month later and the remaining balance within two months later. A tax payment of RM13,500 and interest payment of RM18,000 are due in June. No principal repayments or retirements are due during these months. The firm pays rent of RM8,000 per month. An administrative expense is budgeted at RM10,000 per month. A new equipment costing RM32,000 will be bought and paid in April. Cash dividends of RM3,500, RM4,000 and RM4,500 will be paid in April, May and June respectively. The firm forecasts that a total of RM12,000 bonus payment to employees in June. The firm has a beginning cash balance of RM35,000 in April and must maintain a minimum cash balance of RM50,000. Interest on accumulated loan is at 18 percent annual interest and paid in the following month. Prepare a cash budget for the months of April, May and June 2020.
The directors of Kingston & Co. were concerned about the company's cash flow. They requested their accountant to prepare a cash budget for the three months ending 30 June 2020. The expected purchases and sales for the first half of year 2020 are as follows: Month January February March April May June Purchases (RM) 125,500 145,500 130,550 135,000 155,500 115,500 Sales (RM) 185,000 165,000 185,000 275,000 295,000 245,000 Credit sales accounted for 75 percent of the total sales, the remaining 25 percent are cash sales. 50 percent of the credit sales will be collected one month after the sales and 48 percent will be collected two months after sales. The balance 2 percent of the credit sales are never collected. The firm has an opportunity to receive RM1,500 as a royalty every month. 40 percent of the purchase price is paid in cash. 35 percent of purchase price will be paid one month later and the remaining balance within two months later. A tax payment of RM13,500 and interest payment of RM18,000 are due in June. No principal repayments or retirements are due during these months. The firm pays rent of RM8,000 per month. An administrative expense is budgeted at RM10,000 per month. A new equipment costing RM32,000 will be bought and paid in April. Cash dividends of RM3,500, RM4,000 and RM4,500 will be paid in April, May and June respectively. The firm forecasts that a total of RM12,000 bonus payment to employees in June. The firm has a beginning cash balance of RM35,000 in April and must maintain a minimum cash balance of RM50,000. Interest on accumulated loan is at 18 percent annual interest and paid in the following month. Prepare a cash budget for the months of April, May and June 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:3.
The directors of Kingston & Co. were concerned about the company's cash flow.
They requested their accountant to prepare a cash budget for the three months
ending 30 June 2020. The expected purchases and sales for the first half of year
2020 are as follows:
Month
January
February
March
Purchases (RM)
125,500
145,500
130,550
135,000
Sales (RM)
185,000
165,000
185,000
275,000
295,000
245,000
|April
May
June
155,500
115,500
Credit sales accounted for 75 percent of the total sales, the remaining 25
percent are cash sales. 50 percent of the credit sales will be collected one
month after the sales and 48 percent will be collected two months after sales.
The balance 2 percent of the credit sales are never collected. The firm has an
opportunity to receive RM1,500 as a royalty every month.
40 percent of the purchase price is paid in cash. 35 percent of purchase price
will be paid one month later and the remaining balance within two months later.
A tax payment of RM13,500 and interest payment of RM18,000 are due in
June. No principal repayments or retirements are due during these months.
The firm pays rent of RM8,000 per month. An administrative expense is
budgeted at RM10,000 per month.
A new equipment costing RM32,000 will be bought and paid in April.
Cash dividends of RM3,500, RM4,000 and RM4,500 will be paid in April, May
and June respectively.
The firm forecasts that a total of RM12,000 bonus payment to employees in
June.
The firm has a beginning cash balance of RM35,000 in April and must maintain
a minimum cash balance of RM50,000.
Interest on accumulated loan is at 18 percent annual interest and paid in the
following month.
Prepare a cash budget for the months of April, May and June 2020.
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