Question 1 (20 MARKS)

Olive Sdn Bhd needs a cash budget for October. The following information is available:

1. The cash balance at the beginning of October is RM9,000.
2. The actual sales for August and September and expected sales for October are as follows:

	August (RM)	September (RM)	October (RM)
Cash sales	6,500	5,250	7,400
Sales on credit	20,000	30,000	40,000
Total sales	26,500	35,250	47,400

Credit sales are collected over a 3-month period in the following ratio:

1. 10% in the month of sale
2. 70% in the month following sale
3. 18% in the second month following sale
4. 2% remaining are uncollectable

3. Purchases of inventory will total RM25,000 for October, 20% will be paid for in October. Accounts payable from Septembers inventory purchases is RM16,000, this will be paid in October.
4. Selling and administrative expenses are budgeted at RM13,000 for October, of this amount, RM4,000 is for depreciation.
5. Equipment costing RM18,000 will be purchased for cash during October, and cash dividends of RM3,000 will be paid during the month.
6. The company must maintain a minimum cash balance of RM5,000. An open line of credit is available from the companys bank as needed.

Required:

1. Prepare a schedule of expected cash collections in October.

(5 marks)

2. Prepare a schedule of expected cash payments for inventory purchases in October.

(3 marks)

3. Prepare a cash budget for October. Indicate any borrowing that will be needed.

(12 marks)