Reference no: EM133112973
Kirana Frozenfood Corporation Berhad reported Sales of RM70,000 in May and RM80,000 in June 2020. The forecasted Sales for July, August and September 2020 are RM90,000, RM100,000, and RM110,000, respectively. The beginning cash balance on the 1st of July is RM3,000 on and the firm wishes to maintain a minimum cash balance of RM5,000. The total long-term liabilities of the company is RM25,000.
a) The firm makes 20% of Sales for cash, 60% is collected in the next month, and the remaining 20% is collected in the second month following the Sale.
b) The firm receives other income of RM2,000 per month.
c) The firm's actual or expected purchases, all made for cash, are RM65,000, RM70,000, and RM85,000 for the months of July through September, respectively.
d) Rental expenses are RM5,500 per month.
e) Wages and salaries are 10% of the previous month's Sales.
f) The net income is RM30,000. Cash dividends are 20% of the net income and will be paid in August.
g) The payment of principal and interest of the long-term liabilities is 20% of the total long-term liabilities and the payment is due in August.
h) A cash purchase of equipment costing RM15,500 is scheduled in September.
i) The earnings before taxes is RM100,000. The taxes amount is 10% of the earnings before taxes and it is due for payment in the month of August.
Instructions:
1) Given the above information, develop a Cash Budget for Kirana Frozen food Corporation Berhad covering the second quarter period of 2020, namely for the months of July, August and September 2020.
2) Discuss and recommend the Cash Management Strategy based on the cash position at the end of each period (Surplus or Deficit).
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