Question

part b prepare the cash budget

Bee Gee Company prepares monthly cash budgets. Below is a set of relevant data extracted from existing reports, and the subsidiary budgets for the two months of September and October 2020. Sales Purchases Wages Manufacturing overhead Administration expenses Sale of equipment Cash paid for new IT equipment September RM 3,140,000 1,620,000 514,000 216,000 390,000 October RM 4,120,000 2,160,000 552,000 234,000 390,000 82,000 165,000 All sales are on credit. Collections from debtors normally have the following pattern: 60 per cent in the month of sale, 30 per cent one month later, and 10 per cent two months later. Fortunately, Bee Gee does not have much trouble with bad debts. Sales in June, July and August were RM2,950,000, RM2,660,000 and RM3,020,000 respectively. Purchases are paid for in the next month. Purchases in August were RM1,820,000. Manufacturing overhead includes RM125,000 for depreciation expense, while the administration expenses include an amount of RM56,000 for depreciation expenses. Both manufacturing overhead and administration expenses are paid in the same month. Bee Gee expects to be able to repay the principal on a RM500,000 loan in October. Required: (a) Prepare a schedule of receipts from debtors for the two months ending 31 October 2020. (8 marks) (b) Prepare a cash budget for two months ending 31 October 2020. The cash balance at 31 August 2020 is expected to be RM126,000. (23 marks)

Answer 1

Cash Budget For 2 month

Particular		September RM		October RM
Opening Balance (A)		126,000		(104,000)
ADD:Receipts (B)
Debtor 60% (Current Month)		188,4000		247,2000
Collection from debtor 30% and 10%(Previouse Month)	906,000+266000	11,72000	942000+302000	124,4000
Sale Of Equipment		------		82,000
Total ( A+B)		318,2000		369,4000
Less:Payments
Material purchased		182,0000		162,0000
Wages		514,000		552,000
Manufacturing overhead & depreciation	216000+125000	341,000		234,000
Administrative overhead & Depreciation	390,000+56,000	446,000		390,000
Cash Paid for new It Equipment		165,000		---------
Loan Repayment		------------		500,000
ToTal ( C)		32,86,000		32,96,000
Closing Balance (A+B-C)		(104,000)		398,000