Month Cash Sales On Account Cash Purchases 2021 - 2022 Sales Purchases On Account $138,100 $156,500 $170,975 $135,740 $480,000 $600,000 $650,000 $700,000 $345,000 $380,000 $400,000 $480,000 November 2021 December 2021 January 2022 February 2022 March 2022 $25,800 $44,625 $30,400 $226,420 $800,000 $55,100 $540,000

Pelican Merchandising & More is a family-owned store. The business is now approaching the
end of the year and is in the process of identifying its cash needs for the first quarter of the newyear. You are the management accountant of the entity and have been tasked to prepare the cash
budget for the business for the quarter ending March 31, 2022.

• Extracts from the sales and purchases budgets are as follows:
• An analysis of the records shows that trade receivables (accounts receivable) are settled
  according to the following credit pattern, in accordance with the credit terms 4/30, n90:
  55% in the month of sale
  35% in the first month following the sale
  8% in the second month following the sale
  The remaining 2% is expected to be uncollectible
  
  
• Accounts payable are settled as follows, in accordance with the credit terms 2/30, n60:
  85% in the month in which the inventory is purchased
  15% in the following month
  
  
• The management of Pelican Merchandising has negotiated with a tenant to sublet office
  space to her beginning February 1. The rental is expected to be $552,000 per annum. The
  first month’s rent along with one month’s safety deposit is expected to be collected on
  February 1. Thereafter, monthly rental income becomes due at the beginning of each
• 
  Office Furniture & Fixtures, which is estimated to cost $350,000, will be purchased in
  The manager has made arrangement with the suppliers to make a cash deposit of
  40% upon signing of the agreement in February. The balance will be settled in five (5) equal
  monthly instalments beginning March of 2022.
  
  
• The management of Pelican Merchandising is in the process of upgrading its fleet of motor
  During February the business expects to sell an old delivery motor van that cost
  $540,000 at a loss of $34,000 to an employee. Accumulated depreciation on this motor van
  at that time is expected to be $246,000. The employee will be allowed to pay a deposit
  equal to 60% of the selling price in February; the balance will be settled in two equal
  amounts in March & April of 2022.
  
  
• Fixed operating expenses which accrue evenly throughout the year, are estimated to be
  $2,088,000 per annum, which include depreciation on non-current assets of $42,000 per
  month and are expected to be settled monthly.
  
  
• Other operating expenses which accrue evenly throughout the year are expected to be
  $696,000 per annum and will be settled monthly.
  
  A long-term bond purchased by Pelican Merchandising 2 years ago, with a face value of
  $450,000 will mature on January 15, 2022. To meet the financial obligations of the
  business, management has decided to liquidate the investment upon maturity. On that date
  semi-annual interest computed at a rate of 8⅓% per annum is also expected to be
  
  
  
• A compensation payment of $355,000 to a former employee for a back injury sustained in
  an accident in the business storage facility, not covered by insurance, becomes due and
  payable on January 25, 2022.
  
  
• Wages and salaries are expected to be $3,264,000 per annum and will be paid monthly.
  
  
• The cash balance on March 31, 2022 is expected to be an overdraft of $253,000
• The business needs to have a sense of its future cash flows and therefore requires the preparation of the following:

▪ A schedule of budgeted cash collections for trade receivables (sales on account) for each of the months January to March.

▪ A schedule of expected cash disbursements for accounts payable (purchases on account) for each of the months January to March.

▪ A cash budget, with a total column, for the quarter ending March 31, 2022, showing the expected cash receipts and payments for each month and the ending cash balance for each of the three months, given that no financing activities took place.

(b) Another team member who is preparing the Budgeted Balance Sheet for the business for the same quarter ending March 31, 2022 and has asked you to furnish him with the figures for the expected trade receivables and payables to be included in the statement. Is that a reasonable request? If yes, what should these amounts be?