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Question 2 (30 marks)

King Brothers Kitchen sells various kitchen appliances. Management is preparing the firm's cash budget for the third quarter of 2X13 based on the following information:

Expected Sales	N$
May 2X13 (actual)	489 365
June 2X13 (actual)	568 960
July 2X13	569 245
August 2X13	652 325
September 2X13	445 950

Other information includes:

- Historically, 80% of the firm's sales are on credit. Of the credit sales, on average 60% of the sales are collected in the month after the sale (30 days) and the remainder of the credit sales are collected two months after the sale (60 days).

- The cost of inventory is normally 55% of sales and all inventory is bought on credit. 80% of credit purchases are paid in the month after the purchase and the balance in the month thereafter. Inventory is typically purchased in the month before the sale.

- Rental is N$120 000 per month.

- Wages are normally 10% of sales and salaries are N$110 000 per annum.

- Overheads are normally N$18 000 per month.

- A provisional tax payment of N$54 000 is due inn September 2X213.

- The firm has ordered new machinery costing N$280 000 that will be paid in July 2X13 from the firm's bank account.

- A cash dividend of N$62 530 will be paid in July 2X13

- As at 30 June 2X13, the firm's bank balance was N$54 950. The firm requires a minimum cash balance of N$40 000 at all times.

- Any shortfall below the minimum bank balance is to be provided by short - term financing and any amount above the minimum cash balance is to be used to repay the short - term debt, if any.

Required:

a) Prepare a cash budget for King Brothers for the quarter ending 30 September 2X13. Your budget needs to specifically reflect any short - term financing required,. Show all workings.

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