CASH BUDGET EXCERCISE

QUESTION 1

Armada Sdn Bhd’s sales from December 2018 to May 2019 are shown as follows:

Month Sales (RM ‘000)

Actual Sales November, 2018 230
December, 2018 250
January, 2019 180
Forecasted Sales February, 2019 170
March, 2019 220
April, 2019 175
May, 2019 210

You are required to prepare the first-quarter cash budget of Armada Sdn Bhd for the
year 2019 based on the following information:

i. The firm generates 40 percent of cash sales. The credit sales normally will be
collected on an equal amount in each of the two months following the sales.

ii. The firm purchases raw materials one month in advance before sales which the
purchases are approximately 40 percent of its monthly sales. The firm will pay
its suppliers 50 percent of the purchases a month after and the balance is
made two months after the purchases.

iii. The firm is expected to receive rental payment of RM32,000 in February and
RM11,000 in April 2019.

iv. Salaries paid to employees are 15 percent of the previous month's sales.

v. Rental expenses of RM12,000 per month are expected to be paid. However,

the firm is expected to receive a 5 percent discount on the rental expenses in
March 2019.

vi. Interest expenses of RM6,400 is due in January and March 2019.

vii. Cash bonuses to the employees of RM14,000 are expected to be disbursed in

February 2019.

viii. The firm plans to buy a new equipment by cash amounted to RM120,000 in
February.

ix. The firm has a cash balance of RM25,000 on December 31, 2018 wishing to
hold a monthly minimum cash of RM13,000 for liquidity purpose.
ANSWER QUESTION 1

Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19

Sales 230000 250000 180000 170000 220000 175000 210000

1) RECEIPTS (INFLOWS)
Cash Sales 40% 72000 68000 88000
Lag 1 month 30% 75000 54000 51000
Lag 2 months 30% 69000 75000 54000
Receive Rental 32000
TOTAL RECEIPTS 216000 229000 193000

Purchases 92000 100000 72000 68000 88000 70000 84000 0

2) Disbursement (OUTFLOW)
Payment lag 1month 50% 46000 50000 36000 34000 44000
Payment lag 2month 50% 46000 50000 36000 34000
Salaries 15% 37500 27000 25500
Rental Exps 12000 12000 11400
Interest Expenses 6400 6400
Bonuses 14000
Equipment 120000
TOTAL DISBURSEMENT 141900 243000 121300

3) Net Cash Flow 74100 -14000 71700

4) Reconciliation
Net Cash Flow 74100 -14000 71700
Plus: Beginning Balance 25000 99100 85100
Ending Balance 99100 85100 156800
Less: Min Cash Bal 13000 13000 13000
Surplus/Deficit 86100 72100 143800
QUESTION 2

a) Bidara Sdn. Bhd.’s sales from May to October 2019 are tabulated below:

Month Sales (RM)

May 500,000
June 360,000
July 340,000
August 440,000
September 350,000
October 420,000

i) 30 percent of the firm’s monthly sales are on cash whilst the remaining sales
are on credit, which are collected equally in the two subsequent months of
sales.

ii) The raw materials for monthly sales are purchased one month prior to sales
and it amounts to 30 percent of the monthly sales. 40 percent of the
purchases is paid in the month of purchase and the balance is paid equally in
two months following the purchases.

iii) Employees’ salaries are 10 percent of the monthly sales. The firm pays half-
yearly RM30,000 of cash bonuses to its employees in January and July,
respectively.

iv) The firm pays property rental expenses of RM25,000 monthly and receives
RM15,000 dividend from its marketable securities in September every year.

v) Financing cost of RM12,000 is due in September and other miscellaneous

expenses amount to RM5,000 is estimated to be paid every month.

vi) Fully depreciated machines are to be replaced in August and its cost is
expected to be RM100,000.

vii) The firm’s cash balance at end of June is RM50,000 and it maintains
RM25,000 minimum cash monthly.

You are required to prepare the cash budget of Bidara Sdn. Bhd. for the third quarter
of 2019 based on the financial information given above.
(14 marks)

ANSWER QUESTION 2

b)
 Bidara Sdn Bhd
Cash Budget for Third Quarter of Year 2019 (RM’000) /

July August September

Sales 340 440 350

CASH RECEIPT:
30%: Cash sales 102 / 132 / 105 /
35%: 1 month after sales 126 / 119 / 154 /
35%: 2 months after sales 175 / 126 / 119 /
Dividend received - - 15 /
Total receipt 403 / 377 / 393 /

Purchases 132 / 105 / 126 /

CASH DISBURSEMENT:
40%: In month of purchase 52.8 / 42 / 50.4 /
30%: 1 month after purchase 30.6 / 39.6 / 31.5 /
30%: 2 months after purchase 32.4 / 30.6 / 39.6 /
Salaries 34 / 44 / 35 /
Cash bonuses 30 / - -
Rental expenses 25 / 25 / 25 /
Financing cost - - 12 /
Miscellaneous expenses 5/ 5/ 5/
Machines - 100 / -
Total disbursement 209.8 / 286.2 / 198.5 /

Net cash flow 193.2 / 90.8 / 194.5 /

+ Beginning cash balance 50 / 243.2 / 334 /
Ending cash balance 243.2 / 334 / 528.5 /
- Minimum cash required (25) / (25) / (25) /
Cash surplus/(deficit) 218.2 / 309 / 503.5 /

(56 / x 0.25m = 14 marks)