LECTURE ILLUSTRATION I – CASH BUDGET
Arctic Air sell air conditioners to the general public. The management of Arctic Air
have given you the following estimate of receipts and payments and require you to
prepare a cash budget for the three months ended 30 June 2006.
1) Estimated Sales
Cash Sales Credit Sales
February 6,300 14,700
March 7,020 16,380
April 7,518 17,542
May 8,775 20,475
June 8,064 18,816
2) Estimated Purchase of Supplies (all purchases are made on credit)
February 10,700
March 12,000
April 12,500
May 13,800
June 14,700
3) A $2,000 loan repayment will be made in the month of June.
4) Estimated wages, rental and other operating expenses are shown below. These
expenses are paid in the month they are incurred.
March April May June
Wages 3,000 3,300 3,700 4,100
Rent 2,000 2,000 2,000 2,000
Other Expenses 600 800 850 920
5) The owners plan to purchase a new shelving system in May at a cost of $8,000.
Payment is expected to be made in cash.
Additional Information
1. Past experience shows that on average, 50% of money from sales is received
in the month following sale with the remainder being paid in the second month
after sale.
2. Suppliers allow one months credit.
3. It is estimated Artic Air will have a bank balance of $10,000 on 1 April 2006.
LECTURE ILLUSTRATION I – CASH BUDGET
Calculation of Cash Receipts from Credit Sales
Feb Mar. April May June July Aug.
Feb. (14,700) 7350 7350
Mar. (16,380) 8190 8190
Apr. (17,542) 8771 8771
May (20,475) 10237 10238
June (18,816) 9408 9408
Total 7350 15540 16961 19008 19646 9408
Arctic Air
Cash Budget
for the quarter ended 30 June 2006
April May June
Cash (Opening Balance) 10000 14958 13644
Cash Receipts 7518 8775 8064
Credit Sales 15540 16961 19008
Total Receipts 23058 25736 27072
Cash Payments
Purchase of Supplies 12000 12500 13800
Loan Repayment 2000
Wages 3300 3700 4100
Rent 2000 2000 2000
Miscellaneous 800 850 920
New Shelving System 8000
Total Payments 18100 27050 22820
Surplus/Deficit 4958 (1314) 4252
Cash (Closing Balance) 14958 13644 17896
LECTURE ILLUSTRATION II – LOAN SCHEDULE
Anna has borrowed $20,277 to buy a new car. The loan term is 5 years and the
nominal rate of interest is 8%pa compounded semi annually.
Required
1. Calculate the amount of each semi-annual payment.
2. Prepare a loan schedule for the term of the loan.
Year Repayment Interest Reduction in Balance
Liability
0 20,277
1 2,500 811 1689 18,588
1.5 2,500 744 1756 16,832
2.0 2,500 673 1827 15,005
2.5 2,500 600 1900 13,105
3.0 2,500 524 1976 11,129
3.5 2,500 445 2055 9,074
4.0 2,500 363 2137 6,937
4.5 2,500 277 2223 4,715
5.0 2,500 189 2311 2,404
5 2,500 96 2404 0
Total 25,000 4,723 20,277
