Required: (a) 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 July to September. ▪ A schedule of expected cash disbursements for accounts payable (purchases on account) for each of the months July to September. ▪ A cash budget, with a total column, for the quarter ending September 30, 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.
Required:
(a) The business needs to have a sense of its future
preparation of the following:
▪ A schedule of budgeted cash collections for trade receivables (sales on account) for each of
the months July to September.
▪ A schedule of expected cash disbursements for accounts payable (purchases on account)
for each of the months July to September.
▪ A
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.
![SALLAT Household Furnishings & Appliances is a family-owned business. You are the
management accountant of the entity and have been given the task of preparing the cash budget
for the business for the quarter ending September 30, 2022. Your data collection has yielded the
following:
Extracts from the sales and purchases budgets are as follows:
Cash
Sales
Sales
Cash
Purchases
Purchases
Month
On Account
On Account
May
June
$75,000
$135,000
$480,000
$600,000
$390,000
$360,000
$36,000
July
August
September
$86,800
$720,000
$61,700
$450,000
$400,000
$105,600
$112,500
$640,000
$800,000
$68,800
$77,250
$500,000
An analysis of the records shows that trade receivables (accounts receivable) for sales on
account are settled according to the following credit pattern, in accordance with the credit
terms 5/30, n90:
50% in the month of sale
35% in the first month following the sale
15% in the second month following the sale
ii)
Accounts Payable are settled as follows, in accordance with the credit terms – 4/30, n60:
70% in the month in which the inventory is purchased
30% in the following month
iv)
Computer equipment, which is estimated to cost $350,000, will be acquired in August. The
manager has planned with the supplier to make a cash deposit of 50% of the amount upon
signing of the agreement in August, with the balance to be settled in four equal monthly
instalments, starting in September 2022.
v)
A treasury bond purchased by the company with a face value of $560,000 is expected to
mature on July 20, 2022. To meet the financial obligations of the business the management
team has decided to liquidate the investment upon maturity. On that date, quarterly interest
computed at a rate of 7% % per annum is also expected to be collected.
vi)
Fixed operating expenses, which accrue evenly throughout the year, are estimated to be
$1,812,000 per annum [including depreciation on non-current assets of $37,000 per month]
and are settled monthly.
vii) The management Sallat Household has negotiated with a tenant for rental of storage space
beginning on July 1. The rental is expected to be $840,000 per annum and will be paid over
by the tenant quarterly in advance. Rental relating to the quarter under review becomes
due on July 1.
viii) Other operating expenses are expected to be $432,000 per annum and will be settled](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F620845ba-58f6-46cb-950c-72010bab3024%2Fb300a85d-ccb9-4e39-9eed-eb77be10bde9%2Fmpws5f7_processed.png&w=3840&q=75)
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(b) Another team member who is preparing the Budgeted Balance Sheet for the business for
the same quarter ending September 30, 2022, 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?
(c) Upon receipt of the budget, the team manager, Dannie Bruce, has now informed you that, in
keeping with industry players, the management of Salat Household Furnishings have
indicated an industry requirement to maintain a minimum cash balance of $155,000 each
month. He has also noted that management is very keen on keeping the gearing ratio of the
business as low as possible and would therefore prefer to cushion any gaps internally using
equity financing.
Based on the budget prepared, will the business be achieving this desired industry target?
Suggest three (3) internal strategies that may be employed by management to improve the
organization's monthly cash flow and militate against or reduce any possible shortfall
reflected in the budget prepared. Each strategy must be fully explained.
by Bartleby Expert(b) Another team member who is preparing the Budgeted
the same quarter ending September 30, 2022, 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?
(c) Upon receipt of the budget, the team manager, Dannie Bruce, has now informed you that, in
keeping with industry players, the management of Salat Household Furnishings have
indicated an industry requirement to maintain a minimum cash balance of $155,000 each
month. He has also noted that management is very keen on keeping the gearing ratio of the
business as low as possible and would therefore prefer to cushion any gaps internally using
equity financing.
Based on the budget prepared, will the business be achieving this desired industry target?
Suggest three (3) internal strategies that may be employed by management to improve the
organization's monthly
reflected in the budget prepared. Each strategy must be fully explained.
by Bartleby ExpertAnother team member who is preparing the Budgeted
the same quarter ending September 30, 2022, 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?
by Bartleby Expert
