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 on tho monthc Juhu to Sontombor
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 on tho monthc Juhu to Sontombor
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fab89f2fd-2d90-4d55-9e01-3ab3450cbdbc%2F6c991841-c02b-4357-abde-51ec3e791adc%2Fg1rvq91_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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.
![ix)
Wages and salaries are expected to be $2,304,000 per annum and will be paid monthly.
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:
In the month of August, furniture & fixtures, which cost $455,000, will be sold to an
x)
employee at a loss of $20,000. Accumulated depreciation on the furniture & fixtures at that
time is expected to be $305,000. The employee will be allowed to pay a deposit equal to
60% of the selling price in August with the balance settled in two equal amounts in
September & October.
i)
Extracts from the sales and purchases budgets are as follows:
Sales
Cash
Sales
Cash
Purchases
Purchases
xi)
Appliances is in the process of completing a major addition to the business property, which
is estimated to cost $1,200,000, and which is being funded by external borrowing. $420,000
of the principal, along with interest of $14,200 is due to be paid on July 15, 2022.
As part of its investing activities, the management of Sallat Household Furnishings &
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
$105,600
$112,500
$720,000
$640,000
$800,000
$61,700
$68,800
$77,250
$450,000
$400,000
$500,000
xii) The cash balance on September 30, 2022, is expected to be an overdraft of $147,500.
ii)
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
iii)
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 7½ % 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
monthly.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fab89f2fd-2d90-4d55-9e01-3ab3450cbdbc%2F6c991841-c02b-4357-abde-51ec3e791adc%2F417fm8f_processed.jpeg&w=3840&q=75)
Transcribed Image Text:ix)
Wages and salaries are expected to be $2,304,000 per annum and will be paid monthly.
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:
In the month of August, furniture & fixtures, which cost $455,000, will be sold to an
x)
employee at a loss of $20,000. Accumulated depreciation on the furniture & fixtures at that
time is expected to be $305,000. The employee will be allowed to pay a deposit equal to
60% of the selling price in August with the balance settled in two equal amounts in
September & October.
i)
Extracts from the sales and purchases budgets are as follows:
Sales
Cash
Sales
Cash
Purchases
Purchases
xi)
Appliances is in the process of completing a major addition to the business property, which
is estimated to cost $1,200,000, and which is being funded by external borrowing. $420,000
of the principal, along with interest of $14,200 is due to be paid on July 15, 2022.
As part of its investing activities, the management of Sallat Household Furnishings &
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
$105,600
$112,500
$720,000
$640,000
$800,000
$61,700
$68,800
$77,250
$450,000
$400,000
$500,000
xii) The cash balance on September 30, 2022, is expected to be an overdraft of $147,500.
ii)
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
iii)
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 7½ % 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
monthly.
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