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    CHAPTER 3: FINANCIAL FORECASTING & PLANNING

    1. AMAN DAMAI ENTERPRISE

    Balance Sheet as at 31 December 2012

    31/12/2012

    RM

    Cash 305,000

    Accounts receivable 275,000

    Inventory 600,000

    Current assets 1,180,000

    Plant and equipment 1,700,000

    Less: Depreciation (500),000

    Net plant and equipment 1,200,000

    Total assets 2,380,000

    Liabilities and Owners' Equity

    Accounts payable 150,000

    Notes payable 125,000

    Current liabilities 275,000

    Bonds 500,000

    Owners' equity

    Common stock 165,000

    Paid-in-capital 775,000

    Retained earnings 665,000

    Total owners' equity 1,605,000

    Total liabilities and owners' equity 2,380,000

    Additional information:

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    Current sales for Aman Damai Enterprise are RM 1,100,000. The company is

    expecting an increase in sales to RM 1,330,000 in the next year.

    The Net Profit Margin is 5% and the Dividend Payout Ratio is 25%.

    Based on the information above, prepare a Pro forma Balance Sheet for 2013 of Aman Damai

    Enterprise by using percentage of sales method. What is the projected Net Income for 2013?

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    2. Binaraya Corporation is a merchandising corporation. Prepare a pro forma balance sheet for

    Binaraya Corporation for the year 2014. The balance sheet for Binaraya Corporation as of 31

    December 2013 is as follows:

    Binaraya Corporation

    Balance Sheet as at 31 December 2013

    Assets (RM) Liabilities & Equity (RM)

    Cash 15,000 Accounts Payable 2,000

    Account Receivable 6,500 Notes payable 28,500

    Inventories 57,000 Long-term debt 15,000

    Fixed assets (net) 228,000 Common stock 168,000

    Other assets 3,000 Retained earnings 96,000

    Total assets 309,500

    Total liabilities and

    equity 309,500

    Additional information:

    i) Sales for 2013 were RM100, 000 and it was expected to increase by 25% in 2014.

    ii)The company is operating at full capacity.

    iii) Net income for 2013 was RM15,000

    iv) Cash dividend for shareholders in 2013 amounted to RM 4,500

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    3.

    CELCO BERHAD

    Balance Sheet as at 30 June 2013

    30/06/2013

    RM

    Cash 205,000

    Accounts receivable 175,000

    Inventory 500,500

    Current assets 880,500

    Plant and equipment 1,500,000

    Less: Depreciation (250),000

    Net plant and equipment 1,250,000

    Total assets 2,130,500

    Liabilities and Owners' Equity

    Accounts payable 85,500

    Notes payable 175,000

    Current liabilities 260,500

    Bonds 455,000

    Owners' equity

    Common stock 200,500

    Paid-in-capital 500,000

    Retained earnings 714,500

    Total owners' equity 1,415,000

    Total liabilities and owners' equity 2,130,500

    Additional information:

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    Current sales for Celco Berhad are RM 1,500,000. The company is expecting an

    increase in sales to RM 2,000,000 in the next year.

    The Net Profit Margin is 10% and the Dividend Payout Ratio is 15%.

    Based on the information above, prepare a Pro forma Balance Sheet for 2014 Celco Berhad by using

    percentage of sales method. What is the projected Net Income for 2014?

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    4. IT Technologies Inc is a newly formed computer manufacturer. IT Technologies Inc plans to

    forecast its financial statement for the next year (2013). Given below is the balance sheet for the

    company as of 30 June 2012:

    IT Technologies Inc

    Balance Sheet as at 30 June 2012

    Assets (RM) Liabilities & Equity (RM)

    Cash 75,000 Accounts Payable 39,000

    Debtors 85,000 Accruals 85,000

    Inventories 90,000 Notes payable 3,500

    Total Current Assets 250,000 Long-term debt 85,000

    Net Fixed Assets 155,000 Common stock 125,000

    Retained earnings 67,500

    Total assets 405,000 Total liabilities and equity 405,000

    Additional information:

    Sales recorded for 2012 were RM355, 000 and it was expected to increase to RM

    400,000 in the next year

    The Net Profit Margin is 7% and the Dividend Payout Ratio is 20%.

    By assuming the company is operating at full capacity, prepare a Pro forma Balance Sheet for IT

    Technologies Inc by using percentage of sales method.

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    5. Nurin Enterprise is preparing a pro forma balance sheet for the year 2013. The balance sheet

    for Nurin Enterprise as of 31 December 2012 as follows:

    Nurin Enterprise

    Balance Sheet as at 31 December 2012

    Assets (RM) Liabilities & Equity (RM)

    Cash 150,000 Accounts Payable 55,000

    Debtors 75,000 Accruals 75,000

    Inventories 80,000 Notes payable 50,000

    Total Current Assets 305,000 Long-term debt 150,000

    Net Fixed Assets 300,000 Common stock 168,000

    Retained earnings 107,000

    Total assets 605,000 Total liabilities and equity 605,000

    Additional information:

    Sales for 2012 were RM350, 000 and it was expected to increase by 30% in the next

    year

    The Net Profit Margin is 10% and the Dividend Payout Ratio is 25%.

    Based on the information given, prepare a Pro forma Balance Sheet for Nurin Enterprise by using

    percentage of sales method (assume the company is operating at full capacity)

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    6. Given are the financial statements of Petronize Gas Corporation.

    PETRONIZE GAS CORPORATION

    Balance Sheet as at December 2011

    Current Assets: Current Liabilities:

    Cash 225,000.00 A/c Payable 112,500.00

    Marketable Securities 675,000.00 Notes Payable 1,800,000.00

    A/c Receivables 2,700,000.00 Accruals 1,800,000.00

    Inventories 1,687,500.00

    Total Current Assets 5,287,500.00 Total Current Liabilities 3,712,500.00

    Fixed Assets: Long-term Debt:

    Building 2,475,000.00 Bond 4,500,000.00

    Equipment 4,612,500.00

    Furniture 1,800,000.00 Equities:

    Total Fixed Assets 8,887,500.00 Common Shares 2,587,500.00

    Depreciation (2,925,000.00) Retained Earnings 450,000.00

    Net Fixed Assets 5,962,500.00 Total Equities 3,037,500.00

    Total Assets 11,250,000.00 Total Liabilities & Equities 11,250,000.00

    Additional information:

    i. Sales for 2011 were RM 2,850,000 and it was expected to increase to RM 3,000,000

    in year 2012.

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    ii. The company is operating at full capacity.

    iii. Net income for 2011 was RM415,000

    iv. Cash dividend for shareholders in 2011 amounted to RM 200,000

    v. Based on the information above, prepare a Pro forma Balance Sheet of Petronize Gas

    Bhd for year 2012.

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    7. Prepare a pro forma balance sheet for Resque Berhad for the year 2014. All the relevant

    information is given below:

    Resque Bhd

    Balance Sheet as at 31 December 2013

    Assets (RM) Liabilities & Equity (RM)

    Cash 100,000 Accounts Payable 220,000

    Marketable securities 130,000 Accruals 100,000

    Account Receivable 150,000 Notes payable 300,000

    Inventories 320,000 Long-term debt 470,000

    Fixed assets (net) 850,000 Common stock 310,000

    Retained earnings 150,000

    Total assets 1,550,000 Total liabilities and equities 1,550,000

    Sales for 2013 were RM10 million and it was expected to increase to RM 15

    million in 2014.

    The company is operating at full capacity.

    Net income for 2013 was RM500,000

    Cash dividend for shareholders in 2013 amounted to RM 150,000

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    8.

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    ent sales for Sri Wijaya Sdn. Bhd are RM 10 million. The company is expecting an

    increase in sales by 20% in the next year.

    The Net Profit Margin is 5% and the Dividend Payout Ratio is 20%.

    Based on the information above, prepare a Pro forma Balance Sheet for Sri Wijaya Sdn. Bhd by using

    percentage of sales method. How much is the projected Net Income for 2014?

    Sri Wijaya Sdn. Bhd

    Balance Sheet as at 31 December 2013

    Asset RM

    Cash 2,500,000

    Debtors 9,840,000

    Inventories 7,320,000

    Total Current Assets 19,660,000

    Net Fixed Assets 23,040,000

    Total Assets 42,700,000

    Liabilities & Equities

    Creditors 3,570,000

    Accruals 3,600,000

    Notes payable 7,170,000

    Long Term loan 8,500,000

    Ordinary Shares 9,500,000

    Retained Earning 10,360,000

    Total Liabilities & Equities 42,700,000

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    9. Prepare a summarize pro forma income statement for Shamelin Jaya Corp for the period

    ending 31 December 2014 based on the following information:

    Shamelin Jaya Corp

    Income Statement for the year ended 31 December 2013

    RM

    Sales 500,000

    Cost of goods sold 25,000

    Gross profit 475,000

    Operating expenses 150,000

    EBIT 325,000

    Interest expense (13,000)

    EBT 312,000

    Taxes (78,000)

    Net income 234,000

    i) Projected sales for 2014 is RM 750,000 and the firm is assuming to pay RM 75,000 in

    cash dividends in 2013

    ii)The tax rate in 2014 is expected to increase to 30% of EBT

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    10. Prepare a summarize Pro forma Income Statement for Shamsuria Sdn Bhd for the period

    ending 31 December 2013 based on the following information:

    Shamsuria Sdn Bhd

    Income Statement for the year ended 31 December 2012

    RM

    Sales (100% credit) 1,100,000

    Cost of goods sold 600,000

    Gross profit 500,000

    Operating expenses 180,000

    EBIT 320,000

    Interest expense (64,000)

    EBT 256,000

    Taxes (87,000)

    Net income 169,000

    Projected sales for 2013 is RM 1,330,000 and the firm is assuming to pay RM 55,000 in cash

    dividends in 2011

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    11. Bio Energy Resources Bhd wants to forecast cash receipts from sales and also cash

    disbursements for the first quarter of 2015. The projected sales are given as follows:

    Month Sales (RM)

    November 2014 300,000

    December 2014 450,000

    January 2015 550,000

    February 2015 650,000

    March 2015 800,000

    April 2015 850,000

    The company collects 40% of its sales in the month of sales and the remaining balance is paid equally

    in the following two months.

    Purchases are made one month prior to sales and purchases are 80% of sales. The payment of

    purchases is made 60% in the month of purchase and 40% one month after purchase. Other monthly

    expenses are as follows:

    Salary RM 40,000 Interest on loan RM 1,000

    Rent RM 5,000 Utilities RM 10,000

    At the end of March 2015 the company plans to purchase equipment worth RM 70,000 from Metal

    Ware Company. The company also expects to receive RM 60,000 common stock dividend at the

    beginning of every quarter.

    Ending cash balance in December 2014 is expected to be RM 100,000 and the company need to

    maintain a minimum cash balance of RM 20,000 every month. Any borrowing will cost 12% annually

    with the interest paid in the month following the month in which the funds are borrowed. Borrowing

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    takes place at the beginning of the month in which the need for funds arises. Assume that any short

    term financing needed to maintain the cash balance is paid off in the month following the month of

    financing if sufficient funds available.

    Prepare the companys cash budget for the first quarter of 2015.

    12. Fella Design Sdn Bhd is planning to request a line of credit from RHB Bank. The forecasted

    sales and purchases for the company in year 2014 are as follows:

    Month Sales (RM) Purchases (RM)

    July 350,000 125,000

    August 550,000 850,000

    September 700,000 300,000

    October 320,000 240,000

    November 350,000 165,000

    December 85,000 90,000

    The collections of sales are as follows:

    a) Cash sales is 10%

    b) 75% is collected one month after sales

    c) The remaining balance is collected two months after sales

    Payments for raw materials are typically made in the month following the one in which these costs

    have been incurred.

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    Monthly general and administration expenses amount to RM25,000; lease payment is RM 9,000 a

    month; depreciation charges is RM 35,000 a months; miscellaneous expenses is RM 2,500 a month;

    income tax payment of RM 63,000 is due in December and a progress payment of RM 180,000 on

    new machine must be paid in October. Cash on hand in October 1 amount to RM 130,000 and a

    minimum cash balance of RM 90,000 must be maintained throughout the cash budget period.

    Prepare a cash budget for October, November and December 2014.

    13. Haziq Sdn Bhd is in the process of estimating its short term financing needs for 3 months

    ending in 30 Sept 2012. The estimated sales are as follows:

    July RM 110,000

    August RM 120,000

    September RM 100,000

    October RM 110,000

    The collections of sales are as follows:

    a) 50% is collected in the month of sales

    b) 40% is collected one month after sales

    c) 10% is collected two months after sales

    The purchase is 70% of sales and is made one month before the sales occur. The payment is made

    equally in the month of purchases and one month after purchase. The fixed monthly expenditures are

    rent RM 5000 and salaries RM 15,000. The other operating expenses are estimated to be 10% of each

    month sales.

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    The company fells that a minimum cash balance of RM 50,000 should be maintained. Any borrowing

    will cost 10% annually with the interest paid in the month following the month in which the funds are

    borrowed. Borrowing takes place at the beginning of the month in which the need for funds arises.

    Assume that any short term financing needed to maintain the cash balance is paid off in the month

    following the month of financing if sufficient funds available.

    Prepare a cash budget for the months of July to September. Cash on hand on 30/6 was RM 50,000.

    14. The Jaya Corporations projected sales for the first six months of 2011 are as follows:

    January RM 90,000.00 April RM 240,000.00

    February RM 120,000.00 May RM 300,000.00

    March RM 135,000.00 June RM 270,000.00

    Of Jaya Corporation sales, 10% is for cash, another 60% is collected in the month following the sales,

    and 30% is collected in the second month following sale. November and December sales for 2010

    were RM 220,000.00 and RM 175,000.00 respectively.

    Jaya Corporation purchases its raw materials two months in advance of its sales equal to 60% of their

    final sales price. The supplier is paid one month after it makes delivery. For example, purchases for

    April sales are made in February and payment is made in March.

    In addition, Jaya Corporation pays RM 10,000.00 per month for rent and RM 20,000.00 each month

    for other expenditures. Tax repayments of RM 22,500.00 are made each quarter, beginning in March.

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    The companys cash balance at December 31, 2010 was RM 22,000 .00; a minimum balance of RM

    15,000.00 must be maintained at all times. Borrowing takes place at the beginning of the month in

    which the funds are needed. Interest on short term loans equals 12% per annum and is paid in the

    month following the one in which funds are borrowed. Assume that any short term financing needed

    to maintain the cash balance is paid off in the month following the month of financing if sufficient

    funds available.

    Prepare a quarterly cash budget for Jaya Corporation from January to March 2011.

    15. Kemudi Barat Sdn Bhd has achieved sales for the first four month of 2014 as follows:

    Month Actual Sales

    January 80,000

    February 85,000

    March 75,000

    April 90,000

    Meanwhile, the firm has also projected its sales for the following four months of May, June, July and

    August 2014 as follows:

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    Month Projected Sales

    May 90,000

    June 85,000

    July 92,000

    August 92,000

    The firm collects 40% of its sales within the same month it is sold, while another 40% is collected one

    month following the sales and the balance is collected two months after sales.

    The firm purchases raw materials one month before it sales and the cost of goods sold is 40% of sales.

    Payment is made equally in the month of purchase and one month after.

    Furthermore, employees salaries is 50% of cost of goods sold and the amount is paid in full in the

    same month it is incurred. Other fixed expenses which all paid within the same month incurred are

    rent RM 10,000 and administration expenses RM 15,000. Income taxes for the year are estimated at

    RM 20,000 and will be paid equally in the months of June and December.

    The companys cash balance as of 30thApril 2014 was RM 15,000 and a minimum balance of RM

    10,000 must be maintained at all times.

    You are required to prepare a cash budget for the months of May, June and July 2014.

    16. Multech Corporation is a national distributor of computer, computer parts and services.

    Management is in the process of preparing a monthly cash budget for the upcoming six months from

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    January to June, 2013. The Multech Corporations projected sales for the first six months of 2013 are

    as follows:

    January RM 60,000.00 April RM 100,000.00

    February RM 75,000.00 May RM 110,000.00

    March RM 88,000.00 June RM 100,000.00

    Roughly 50% of Multechs sales are collected one month after the sales and another 50% two

    months after the sales. November and December 2012 sales are RM 55,000.00 and RM 62,000.00

    respectively.

    Purchases generally equal 75% of sales and are made two months in advance of anticipated sales, with

    payments made in the month following purchases. Multech also pay other expenses as follows:

    Months Wages & Salaries Rent Other expenses

    January RM 3,000.00 RM 4,000.00 RM 1,000.00

    February RM 10,000.00 RM 4,000.00 RM 500.00

    March RM 7,000.00 RM 4,000.00 RM 1,200.00

    April RM 8,000.00 RM 4,000.00 RM 1,500.00

    May RM 6,000.00 RM 4,000.00 RM 1,500.00

    June RM 4,000.00 RM 4,000.00 RM 1,200.00

    Additional expenditures recorded in the cash budget include the purchase of equipment worth RM

    14,000.00 during February and the repayment of a RM 12,000.00 loan in Mac. Furthermore, in

    January, Multech will pay RM 7,500.00 interest on its long term debt for the period of January to June

    2013. Multech also have to pay interest on short term note equals RM 600.00 in March.

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    Multech currently has a cash balance of RM 20,000.00 and wants to maintain a minimum balance of

    RM 10,000.00. Additional borrowing is necessary to maintain that minimum balance and borrowing

    takes place at the beginning of the month in which the funds are needed. Interest on borrowed funds

    equals 12% per annum and is paid in the month following the loan. Assume that any short term

    financing needed to maintain the cash balance is paid off in the month following the month of

    financing if sufficient funds available.

    Prepare a quarterly cash budget for Multech Corporation from January to March 2013.

    17. Narita Company is trying to estimate its needs for fund during each of the months covering the

    last quarter of 2014. The company projected sales the next months of 2014 are as given below:-

    Months Sales (RM)

    June 55,000

    July 60,000

    August 65,000

    September 75,000

    October 70,000

    November 60,000

    December 53,000

    In the past, 10% of sales were on cash basis, and the collections were 40% in the first month, 30% in

    the second month and 20% in the third months following the sales.

    Purchases are 60% of each month sales, 15% of which are paid in cash, 65% are paid one month later

    and the rest is paid two months after purchase.

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    The monthly rent and loan payments are RM 2,000 and RM 1,000 respectively, to be paid every

    month. Utilities for the firm average 2% of sales and are paid in the month of their incurrence. In

    addition, an amount of RM 1,500 interest will be paid in November 2014 and taxes amounting RM

    6,200 payable in December. The company also pays wages and salaries amount to RM 1,000 plus 5%

    of sales in each months.

    The company fells that a minimum cash balance of RM 10,000 should be maintained. Any borrowing

    will cost 10% annually with the interest paid in the month following the month in which the funds are

    borrowed. Borrowing takes place at the beginning of the month in which the need for funds arises.

    Assume that any short term financing needed to maintain the cash balance is paid off in the month

    following the month of financing if sufficient funds available.

    Prepare a cash budget for the last quarter of 2014. Cash in hand on 30 thSeptember is RM

    11,260.

    18. The Perdana Corporations projected sales for the months of 2013 are as follows:

    January RM 100,000

    February RM 130,000

    March RM 145,000

    April RM 160,000

    Of Perdana Corporation sales, 50% is for cash, while another 50% is collected in the month following

    the sales. Meanwhile, the December sales for 2012 were RM 220,000.00.

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    Perdana Corporation purchases its raw materials one month in advance of its sales equal to 60% of

    their final sales price. The supplier is paid in the same month of purchases.

    In addition, Perdana Corporation pays RM 10,000.00 per month for rent and RM 20,000.00 each

    month for other expenditures.

    The companys cash balance at December 31, 2012 was RM 22,000.00; a minimum balance of RM

    15,000.00 must be maintained at all times. Borrowing takes place at the beginning of the month in

    which the funds are needed. Interest on short term loans equals 12% per annum and is paid in the

    month following the one in which funds are borrowed. Assume that any short term financing needed

    to maintain the cash balance is paid off in the month following the month of financing if sufficient

    funds available.

    Prepare a cash budget of Perdana Corporation from January to March 2013.

    19. Syarikat Bestari has projected its sales for the first eight months of 2014 as follows:

    Month

    Forecasted

    Sales (RM)

    Month

    Forecasted

    Sales (RM)

    January 100,000 May 270,000

    February 115,000 June 170,000

    March 150,000 July 200,000

    April 320,000 August 180,000

    The company collects 20% of its sales in the month of sales, 50% in the month following the sale, and

    the remaining 30% two months following the sale. During November and December 2013, the

    companys sales were RM 220,000 and RM 175,000 respectively.

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    Syarikat Bestari purchases raw materials two months in advance of its sales equal to 65% of its final

    sales prices. The supplier is paid one month after delivery.

    In addition, the company pays RM 10,000 per month for rent and RM 20,000 each month for other

    expenditure. Tax repaymenst of RM 30,000 are made each quarter beginning in March.

    The companys cash balance as of 31 December 2013 was RM 22,000; a minimum ba lance of RM

    20,000 must be maintained at all times to satisfy the firms bank line of credit agreement. The

    company has arranged with its bank for short term credit at an interest rate of 12% per annum.

    Borrowing to meet estimated monthly cash needs takes place at the end of the month, and interest rate

    is not paid until the end of the following month.

    Prepare a cash budget of January to March 2014 for Syarikat Bestari.

    20. Syarikat Mutiara Jati has projected it sales and purchases for the first six months of 2015 as

    follows:

    Month Sales (RM) Purchases (RM)

    December 2014 200,000 120,000

    January 240,000 190,000

    February 250,000 210,000

    March 260,000 195,000

    April 350,000 280,000

    May 400,000 350,000

    June 385,000 300,000

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    The collection of sales is 40% for cash and the balance will be collected one month after the sales

    while payment of purchases is made one month after purchases.

    The company pays RM 45,000 each month for wages and other operating expenses will be 10% of the

    monthly sales. In addition, tax repayment of RM 20,000 is made at the beginning of each quarter.

    The management also decided to buy a new machine costing RM 126,000 on June 2015 and the

    monthly depreciation will be RM 5,000. Meanwhile, interest payment of 12% per annum on RM

    100,000 loan must be made at the beginning of each quarter.

    The companys cash balance on March 2015 will be RM 50,000 and a minimum cash balance of RM

    50,000 must be maintained at all time. Any borrowing will cost 10% annually with the interest paid in

    the month following the month in which the funds are borrowed. Borrowing takes place at the

    beginning of the month in which the need for funds arises. Assume that any short term financing

    needed to maintain the cash balance is paid off in the month following the month of financing if

    sufficient funds available.

    Prepare a cash budget of Syarikat Mutiara Jati for the second quarter of 2015.