Required:A) The business needs to have a sense of its future cash flows and therefore requires the preparation of the following:▪ 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?C) Upon receipt of the budget, the team manager, June Jackson, has now informed you that, in keeping with industry players, the management of Pelican Merchandising have indicated an industry requirement to maintain a minimum cash balance of $185,000 each month. She 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 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. Continued.(ix) 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 thebusiness, management has decided to liquidate the investment upon maturity. On that datesemi-annual interest computed at a rate of 8%% per annum is also expected to becollected.(x) A compensation payment of $355,000 to a former employee for a back injury sustained inan accident in the business storage facility, not covered by insurance, becomes due andpayable on January 25, 2022.(xi) Wages and salaries are expected to be $3,264,000 per annum and will be paid monthly.(xii) The cash balance on March 31, 2022 is expected to be an overdraft of $253,000 Polican Merchandising & More is a family-owned store. The business is now approaching theend 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 cashbudget for the business for the quarter ending March 31, 2022.(1) Extracts from the sales and purchases budgets are as follows:Month2021 - 2022CashCashPurchasesSalesOnSalesPurchasesOnAccountAccountNovember 2021December 2021January 2022February 2022March 2022$138,100$156,500$170,975$135,740$480,000$600,000$650,000$700,000$800,000$25,800$44,625$30,400$55,100$345,000$380,000$400,000$480,000$540,000$226.420(ii)An analysis of the records shows that trade receivables (accounts receivable) are settledaccording to the following credit pattem, in accordance with the credit tems 4/30, n90.55% in the month of sale35% in the first month following the sale8% in the second month following the saleThe remaining 2% is expected to be uncollectible(ii) Accounts payable are settled as follows, in accordance with the credit terms 2/30, n60:85% in the month in which the inventory is purchased15% in the following month(iv) The management of Pelican Merchandising has negotiated with a tenant to sublet officespace to her beginning February 1. The rental is expected to be $552,000 per annum. Thefirst month's rent along with one month's safety deposit is expected to be collected onFebruary 1. Thereafter, monthly rental income becomes due at the beginning of eachmonth.(v)Office Furniture & Fixtures, which is estimated to cost $350,000, will be purchased inFebruary. The manager has made arrangement with the suppliers to make a cash deposit of40% upon signing of the agreement in February. The balance will be settled in five (5) equalmonthly instalments beginning March of 2022.(vi) The management of Pelican Merchandising is in the process of upgrading its fleet of motorvehicles. 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 vanat that time is expected to be $246,000. The employee will be allowed to pay a depositequal to 60% of the selling price in February; the balance will be settled in two equalamounts in March & April of 2022.(vii) 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 permonth and are expected to be settled monthly.(vii) Other operating expenses which accrue evenly throughout the year are expected to be$696,000 per annum and will be settled monthly.

A cash budget stands as a pivotal financial planning instrument, delineating a company's anticipated…

Required: A) The business needs to have a sense of its future cash flows and therefore requires the preparation of the following: ▪ 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? C) Upon receipt of the budget, the team manager, June Jackson, has now informed you that, in keeping with industry players, the management of Pelican Merchandising have indicated an industry requirement to maintain a minimum cash balance of $185,000 each month. She 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 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Required:

A) The business needs to have a sense of its future cash flows and therefore requires the preparation of the following:

▪ 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?

C) Upon receipt of the budget, the team manager, June Jackson, has now informed you that, in keeping with industry players, the management of Pelican Merchandising have indicated an industry requirement to maintain a minimum cash balance of $185,000 each month. She 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 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.

Continued.
(ix) 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 8%% per annum is also expected to be
collected.
(x) 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.
(xi) Wages and salaries are expected to be $3,264,000 per annum and will be paid monthly.
(xii) The cash balance on March 31, 2022 is expected to be an overdraft of $253,000

Polican 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 new
year. 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.
(1) Extracts from the sales and purchases budgets are as follows:
Month
2021 - 2022
Cash
Cash
Purchases
Sales
On
Sales
Purchases
On
Account
Account
November 2021
December 2021
January 2022
February 2022
March 2022
$138,100
$156,500
$170,975
$135,740
$480,000
$600,000
$650,000
$700,000
$800,000
$25,800
$44,625
$30,400
$55,100
$345,000
$380,000
$400,000
$480,000
$540,000
$226.420
(ii)
An analysis of the records shows that trade receivables (accounts receivable) are settled
according to the following credit pattem, in accordance with the credit tems 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
(ii) 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
(iv) 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
month.
(v)
Office Furniture & Fixtures, which is estimated to cost $350,000, will be purchased in
February. 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.
(vi) The management of Pelican Merchandising is in the process of upgrading its fleet of motor
vehicles. 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.
(vii) 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.
(vii) Other operating expenses which accrue evenly throughout the year are expected to be
$696,000 per annum and will be settled monthly.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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