Berrington specializes in automobile accessories and receives all income from sales. The sales estimates are as follows:

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Sales (in millions)	SAR 820	SAR 850	SAR 930	SAR 1,010

Projected sales in the first quarter of the following year are SAR 1,500 (in million)

Berrington Company has beginning receivables of SAR345 million and an average collection period of 45 days.

The company purchases from suppliers in a quarter are equal to 50 percent of the next quarter’s forecast sales. The payables period is 60 days. Wages, taxes, and other expenses are 28 percent of sales, and interest and dividends are SAR80 million per quarter. The capital expenditures are SAR250 million in quarter 2.

The initial cash balance is SAR75 million, and the company’s policy is to maintain a minimum balance of SAR50 million.

You are required to:

a) Prepare the cash budget by completing the following schedules for Barrington Company.

b) Suggest how should Berrington manages its cash deficit.

Note: You are required to show your workings for cash collections and cash disbursement for quarter 1.

Cash collection schedule:

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Beginning Receivables
Sales
Cash Collections
Ending receivables

Cash disbursements schedule:

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Payment of accounts
Wages, taxes and other expenses
Capital expenditures
Interest and dividend payments
Total cash disbursements

Net cash flow and cash balance:

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Total cash collections
Total cash disbursements
Net cash inflow

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Beginning Cash Balance
Net cash inflow
Ending cash balance
Minimum cash balance
Cumulative surplus (deficit)

Answer rating: 100% (QA)

a Cash collection schedule Begginning Receivables Sales Cash coll... View the full answer