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:
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?

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

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:

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?

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.
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)




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.

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.

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


8.

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C
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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


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






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


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
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.

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.

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.

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:


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 30
th
April 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
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.

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.

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
th
September 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.

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.

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 balance 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

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.