Revision question on preparation of cash budget.

One of the first job that have been assigned to you as a new of Mwananchi Construction Company is to prepare a cash budget for the period from 1stjune 2014 to 30thNovember 2014.

  • 90% of all sales are credit sales;80% of the credit sales are collected in the following month,15% and 4% of the credits sales are collected 60 days and 90 days after sale respectively;1% of the credit sales becomes has debts and is never collectable.
  • Purchases during the month equal 60% of the following moth’s estimated sales. Payment to purchases is made in the month following purchase.
  • The cash balance as at 1stjune 2014 is Tshs 1,420,000.
  • The firm anticipates a delivery of new equipment in September 2014, Tshs 1,000,000 will be paid upon delivery.
  • A quarterly tax payment of Tshs 500,000 is anticipated in September and December 2014.
  • Rent is Tshs 100,000 per month. Other cash expenses average 3% of the current month’s sales.
  • Depreciation expense averages Tshs 150,000 monthly.
  • Labour cost paid monthly average 10% of the following month’s sales.
  • The board of directors desires to maintain the firm’s current dividend policy. A dividend payment of Tshs 3,000,000 is scheduled for October 2014.
  • The company experienced sales of Tshs 3,000,000 in march 2014 and sales of Tshs 2,000,000 during each of the next two months of 2014
  • The projected sales schedule for the seven months of 2014 are given below.
  • June Tshs 3,000,000
  • July 5,000,000
  • August 5,000,000
  • September 6,000,000
  • October 3,000,000
  • November 2,000,000
  • December 2,000,000

Prepare the cash budget, using the data above.

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