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2 Tutorial Question and Answer On Cash Budget

The document provides cash budget information for Haryana Jaya for the second quarter of 2017. It lists the company's projected sales, cash receipts from sales, purchases, cash disbursements for expenses and purchases, and the resulting net cash flow and ending cash balance for each month. The cash budget shows a cash deficit in April that is met by borrowing, and sufficient cash balances in May and June with no additional borrowing needed.

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Hasnita Hasan Budin
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598 views4 pages

2 Tutorial Question and Answer On Cash Budget

The document provides cash budget information for Haryana Jaya for the second quarter of 2017. It lists the company's projected sales, cash receipts from sales, purchases, cash disbursements for expenses and purchases, and the resulting net cash flow and ending cash balance for each month. The cash budget shows a cash deficit in April that is met by borrowing, and sufficient cash balances in May and June with no additional borrowing needed.

Uploaded by

Hasnita Hasan Budin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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TUTORIAL QUESTIONS ON CASH BUDGET

Below is the information for Haryana Jaya:

a) Haryana Jaya’s projected sales for the first eight months of 2017 are as follows:

January 90,000 May 300,000


February 120,000 June 270,000
March 135,000 July 225,000
April 240,000 August 150,000

10% of sales is for cash, another 60% is collected in the following month and 30% is
collected in the second month following sales.

b) Haryana Jaya purchases raw materials one month before its sales. Amount of raw
materials needed is 50% of its sales. 50% of the purchases are paid in the month of
purchase and the balance is paid one month after the purchase.

c) The company pays RM10,000 per month for renting purposes, RM25,000 for salaries and
RM20,000 each month for other expenditures. Depreciation is fixed at RM5,000 per
month.

d) Annual interest of RM30,000 is to be paid in May, June and July.

e) A new machine worth RM110,000 will be purchased in June in order to replace the
existing machine.

f) The firm will receive dividend of RM40,000 from its investment beginning of each
quarter.

g) The firm’s cash balance on 31st March is RM10,000 and a minimum balance of
RM10,000 is to be maintained at all times.

Prepare a cash budget covering the second quarter of 2017.

1
ANSWER SCHEMEFOR CASH BUDGET CLASS EXERCISES

Haryana Jaya
Cash Budget for the Second Quarter 2017

April May June


Sales 240,000√ 300,000√ 270,000√
Cash receipts:
10% sales - cash 24,000√ 30,000√ 27,000√
60% sales - collect 1 mth after 81,000√ 144,000√ 180,000√
30% sales - collect 2 mth after 36,000√ 40,500√ 72,000√
Dividend 40,000√
Total cash receipts 181,000 214,500 279,000

Purchases 150,000√ 135,000√ 112,500√


Cash disbursements:
50% purchases- paid in the mth of purchase 75,000√ 67,500√ 56,250√
50% purchases- paid 1 mth after purchase 60,000√ 75,000√ 67,500√
Rent 10,000√ 10,000√ 10,000√
Salaries and wages 25,000√ 25,000√ 25,000√
Other expenditures 20,000√ 20,000√ 20,000√
Interest 10,000√ 10,000
Machine 110,000
Total cash disbursements 190,000 207,500 298,750

Net cash flow (9,000) √ 7,000√ (19,750)√


Beginning cash balance 10,000√ 10,000√ 17,000√
Ending cash balance 1,000 √ 17,000√ (2,750)√
Minimum cash balance 10,000 10,000 10,000
Surplus/borrowing (9,000) √ 7,000√ (12,750)√
Ending cash balance 10,000 17,000 10,000

2
QUESTION 2

Tri Style sales in October, November and December 2017 were RM80,000, RM90,000 and
RM70,000 respectively. In 2018, Tri Style predicts its sales to be as follows:

January February March April

RM90,000 RM130,000 RM110,000 RM140,000

Historically, 20% of Tri Style’s sales have been for cash. 40% of credit sales will be paid one
month after and 60% of credit sales will be paid two month after.

Tri Style’s purchases of raw materials are 60% of sales and are made one month prior to sales.
30% of the purchases are paid in the month of purchase while the remaining of the purchases is
paid in the following month.

Tri Style pays fixed monthly RM8,000 rental and RM12,000 wages. In addition, the company is
expected to pay RM20,000 annual interest at the end of each quarter. Dividend of RM7,000 is to
be paid in February.

The company’s ending cash balance for December 2017 is RM10,000 and the company plans to
maintain the same amount of minimum cash balance monthly.

Based on the information, prepare a cash budget for Tri Style for the first quarter of 2018.

3
Tri Style
Cash budget for the first quarter 2018

November December January February March April


Sales 90,000 70,000 90,000 130,000 110,000 140,000
Cash receipts:
20% - cash sales 18,000 26,000 22,000
40% - Credit sales paid 1 mth after 22,400 28,800 41,600
60% - Credit sales paid 2 mth after 43,200 33,600 43,200
Total cash receipts 83,600 88,400 106,800

Purchases 54,000 78,000 66,000 84,000


Cash disbursements:
30% of purchases - cash 23,400 19,800 25,200
30% of purchases - 1 mth after 37,800 54,600 46,200
Rental 8,000 8,000 8,000
Wages 12,000 12,000 12,000
Interest 5,000
Dividend 7,000
Total cash disbursements 81,200 101,400 96,400

Net cash flow 2,400 (13,000) 10,400


Ending cash balance 10,000 12,400 10,000
12,400 (600) 20,400
Minimum Cash balance 10,000 10,000 10,000
Surplus/borrowing 2,400 (10,600) 10,400
Ending cash balance 12,400 10,000 20,400

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