Question

PART B - Answer THREE questions only. Question 1 Tijari Sdn Bhd is a main distributor of Mediterranean juices in Kuala Lumpur. The company's Budgeted Statement of Financial Position as of 30 June 2018 is shown below: Tijari Sdn Bhd Statement of Financial Position as at 30 June 2018 Assets RM Cash 90,000 Accounts receivable 136,000 Inventory 100,000 Plant and equipment, net of depreciation 210,000 Total assets 536,000 Liabilities and shareholders' equity Accounts payable Common shares Retained earnings Total liabilities and shareholders' equity 109,100 327,000 99,900 536,000 Mr Muiz, a newly hired accountant is preparing a master budget for the third quarter of 2018. He just attended a monthly operational meeting and gathered the following information: • Estimated sales for July to October 2018 will be as below: July August September October Cash sales RM65,000 RM70,000 RM83,000 RM90,000 Sales on account RM200,000 RM250,000 RM300,000 RM350,000 Total sales RM265,000 RM320,000 RM383,000 RM440,000 Sales on account are collected over a three-month period: 20 percent collected in the month of sale, 60 percent in the month following the sale and 18 percent in the second month following the sale. The remaining 2 percent is uncollectible. • The company's cost of goods sold is 70 percent of sales. Each month's ending inventory should equal to 30 percent of next month's cost of goods sold. With the long relationship with manufacturer, the company pays 50 percent of the juices in the month of purchase and another 50 percent is in the month following the purchase. Its monthly selling and administrative expenses are estimated RM55,000 inclusive of depreciation expense of RM5,000. • The company purchased vehicles in the beginning of the year and the monthly instalments are RM12,000 throughout the year. The bonuses to be paid to its employees in each month of July and September are RM40,000 The insurance premium for the warehouse of RM60,000 is due in July. The company's policy is to maintain a minimum cash balance of RM20,000 and may seek short term Islamic financing from a local bank at a monthly profit rate of 2 percent per month. The company may arrange to get the financing at the beginning of any month needing the financing and may repay all or any amount of the financing, at the end of any month together with the profits due.

Answer 1

(i) Total Cash Collections
	July	August	September
Sales on account	RM2,00,000	RM2,50,000	RM3,00,000
20% in the month of sale	RM40,000	RM50,000	RM60,000
60% in next month		RM1,20,000	RM1,50,000
18% in second month			RM36,000
Received from accounts receivable balance as on 30-06-2018
136000/80%*60%	RM1,02,000
136000/80%*18%		RM30,600
Total Collections from Sales on account	RM1,42,000	RM2,00,600	RM2,46,000
Cash Sales	RM65,000	RM70,000	RM83,000
Total Collections	RM2,07,000	RM2,70,600	RM3,29,000
(ii) Merchandise Purchase Budget
	July	August	September	Total
Total sales	RM2,65,000	RM3,20,000	RM3,83,000	RM9,68,000
Cost of Goods sold @ 70% sales (a)	RM1,85,500	RM2,24,000	RM2,68,100	RM6,77,600
Ending Inventory (30% of next month COGS) (b)	RM67,200	RM80,430	RM92,400	RM2,40,030	=440000*70%*30% For Sept.
Opening Inventory (c )	RM1,00,000	RM67,200	RM80,430	RM2,47,630
Purchase (a+b-c)	RM1,52,700	RM2,37,230	RM2,80,070	RM6,70,000
(iii) Cash Disbursements for Merchandise Purchase
	July	August	September
Purchase	RM1,52,700	RM2,37,230	RM2,80,070
50% in the month of purchase	RM76,350	RM1,18,615	RM1,40,035
50% in next month		RM76,350	RM1,18,615
Accounts payable as on 30-06-2018	RM1,09,100
Total Cash Disbursements	RM1,85,450	RM1,94,965	RM2,58,650
(iv) Cash Budget
	July	August	September	Total
Opening Cash Balance	RM90,000	RM20,000	RM20,000	RM90,000
Total Collections	RM2,07,000	RM2,70,600	RM3,29,000	RM8,06,600
-Total cash disbursements	-RM1,85,450	-RM1,94,965	-RM2,58,650	-RM6,39,065
-Monthly cash S&A Expense (55000-5000 Dep.)	-RM50,000	-RM50,000	-RM50,000	-RM1,50,000
-Monthly Installment for Vehicle	-RM12,000	-RM12,000	-RM12,000	-RM36,000
-Bonus to employees	-RM40,000	-	-RM40,000	-RM80,000
-Insurance premium for warehouse	-RM60,000	-	-	-RM60,000
Balance before Borrowing or Repayment	-RM50,450	RM33,635	-RM11,650	-RM68,465
Minimum Cash Balance required	RM20,000	RM20,000	RM20,000	RM20,000
Borrow at the beginning of the month	RM70,450	-	RM31,650	RM1,02,100
Repay at the end of the month	-	RM13,111	-	RM13,111
Profit paid with Repayment @ 2% p.m.	-	RM524.42	-	RM524
Closing Cash Balance	RM20,000	RM20,000	RM20,000	RM20,000
Note: Interest will be paid for 2 months as amount is borrowed at the beginning of July and repaid at the end of Aug. (i.e 13111*2%*2=545)