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.