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- 20 Marks
Question
WHYME LIMITED is engaged in the manufacturing and sales of fast-moving consumer products. The following data are projections for a period of six months:
| Month | Sales (N’000) | Purchases (N’000) | Salaries (N’000) | Staff Salary Deductions (N’000) | Overheads (N’000) |
|---|---|---|---|---|---|
| Jan | 9,600 | 5,400 | 1,650 | 78 | 1,650 |
| Feb | 15,800 | 12,000 | 1,760 | 82 | 1,920 |
| March | 16,000 | 10,000 | 1,760 | 90 | 2,100 |
| April | 17,600 | 11,000 | 1,789 | 89 | 2,400 |
| May | 14,800 | 11,200 | 1,842 | 92 | 1,860 |
| June | 14,200 | 9,800 | 1,800 | 85 | 1,720 |
Other additional information:
- Sales are 25% on cash basis, 55% is collected in the month following sales, and the balance in the third month.
- All purchases are on 30 days credit while 20% of overheads are paid in the same month, with the balance in the following month.
- Net salaries will be paid in the same month, while statutory deductions are remitted on the 10th day of the following month.
- A N10 million loan will be released in March to finance the purchase of a new asset costing N12 million in the same month. The loan will be repaid equally over four months starting from April. (Ignore interest).
- An old asset will be disposed of in April for N1.5 million.
- Cash balance as at the end of February will be N6.5 million, with N2.5 million put into a short-term investment in March at a 2% monthly interest rate, credited at the beginning of the following month.
Required:
Prepare a cash budget for the period of March to May. (Ignore taxation).
(20 Marks)
Answer
WHYME LIMITED
CASH BUDGET FOR THREE MONTHS ENDING MAY YEAR XXX
| March (N’000) | April (N’000) | May (N’000) | |
|---|---|---|---|
| INFLOWS | |||
| Sales Collections | 14,610 | 16,360 | 16,580 |
| Loan | 10,000 | – | – |
| Fixed Asset Disposal | – | 1,500 | – |
| Investment Income | – | 50 | 50 |
| Total Inflows (A) | 24,610 | 17,910 | 16,630 |
| OUTFLOWS | |||
| Purchases | 12,000 | 10,000 | 11,000 |
| Salaries | 1,670 | 1,700 | 1,750 |
| Salaries Deductions | 82 | 90 | 89 |
| Overheads | 1,956 | 2,160 | 2,292 |
| Fixed Assets | 12,000 | – | – |
| Loan Repayment | – | 2,500 | 2,500 |
| Investment | 2,500 | – | – |
| Total Outflows (B) | 30,208 | 16,450 | 17,631 |
| Balance B/F | 6,500 | 902 | 2,362 |
| Net Cash Flow (A – B) | (5,598) | 1,460 | 1,001 |
| Balance C/F | 902 | 2,362 | 1,36 |
Workings
- Tags: Asset Disposal, Cash Budget, Financial planning, Loan, Payments, Receivables
- Level: Level 1
- Uploader: Joseph