Required: (a) The business needs to have a sense of its future cashflows 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 October to December. • A schedule of expected cash disbursements for accounts payable (purchases on account) for each of the months October to December. • A cash budget, with a total column, for the quarter ending December 31, 2021, 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 and has asked you to furnish him with the figures for the expected trade receivables and payables to be induded in the statement at December 31, 2021. Is that a reasonable request? If yes, what should these amounts be? (c) Upon receipt of the budget the team manager has now informed you that the management of Miller Merchandising & More have indicated a desire to maintain a minimum cash balance of $125,000 each month. Based on the budget prepared, will the business be achieving this desired target? Given that the management does not wish to borrow any funds from outside sources, suggest three (3) internal strategies that the business may employ in order to improve the organization's monthly cash flow. 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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please assist with (b) and (c)

Snip & Sketch
O New
Cash
Sales
Sales
On Account
Month
Purchases
August
September
October
$85,000
$70,000
$88,550
$77,160
$174,870
$640,000
$550.000
$600,000
$420,000
$550,000
$500.000
$600,000
$450.000
November
December
$800,000
$500,000
i)
An analysis of the records shows that trade receivables are settled according to the
following credit pattern, in accordance with the credit terms 4/30, n90:
50% in the month of sale
30% in the first month following the sale
20% in the second month following the sale
ii)
Expected purchases include monthly cash purchases of 5%. All other purchases are on
account. Accounts payable are settled as follows, in accordance with the credit terms -
2/30, n60:
60% in the month in which the inventory is purchased
40% in the following month
iii)
Fixed operating expenses which accrue evenly throughout the year, are estimated to be
$1,680,000 per annum, (including depreciation on non-current assets of $420,000 per
annum) and is settled monthly.
iv)
Wages and salaries are expected to be $2,280,000 per annum and will be paid monthly.
v)
Other operating expenses are expected to be $108,000 per quarter and will be settled
monthly.
In the month of November, an old motor vehicle, which cost $650,000, will be sold to an
employee at a gain of $30,000. Accumulated depreciation on the motor vehicle at that time
is expected to be $540,000. The employee will be allowed to pay a deposit equal to 60% of
the selling price in November and the balance settled in two equal amounts in December
2021 & January of 2022.
vi)
vii)
Computer equipment, which is estimated to cost $320,000, will be acquired in November.
The manager has made arrangements with the dealer to make a cash deposit of 50% of the
amount upon signing of the agreement in November, with the balance to be settled in four
equal monthly instalments, starting in December 2021
viii) The management of Miller Merchandising Company has negotiated with a tenant to rent
office space to her beginning November 1. The rental is $624,000 per annum. The first
month's rent along with one month's safety deposit is expected to be collected on
November 1. Thereafter, monthly rental income becomes due at the beginning
month.
each
1:48 pm
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近
Transcribed Image Text:Snip & Sketch O New Cash Sales Sales On Account Month Purchases August September October $85,000 $70,000 $88,550 $77,160 $174,870 $640,000 $550.000 $600,000 $420,000 $550,000 $500.000 $600,000 $450.000 November December $800,000 $500,000 i) An analysis of the records shows that trade receivables are settled according to the following credit pattern, in accordance with the credit terms 4/30, n90: 50% in the month of sale 30% in the first month following the sale 20% in the second month following the sale ii) Expected purchases include monthly cash purchases of 5%. All other purchases are on account. Accounts payable are settled as follows, in accordance with the credit terms - 2/30, n60: 60% in the month in which the inventory is purchased 40% in the following month iii) Fixed operating expenses which accrue evenly throughout the year, are estimated to be $1,680,000 per annum, (including depreciation on non-current assets of $420,000 per annum) and is settled monthly. iv) Wages and salaries are expected to be $2,280,000 per annum and will be paid monthly. v) Other operating expenses are expected to be $108,000 per quarter and will be settled monthly. In the month of November, an old motor vehicle, which cost $650,000, will be sold to an employee at a gain of $30,000. Accumulated depreciation on the motor vehicle at that time is expected to be $540,000. The employee will be allowed to pay a deposit equal to 60% of the selling price in November and the balance settled in two equal amounts in December 2021 & January of 2022. vi) vii) Computer equipment, which is estimated to cost $320,000, will be acquired in November. The manager has made arrangements with the dealer to make a cash deposit of 50% of the amount upon signing of the agreement in November, with the balance to be settled in four equal monthly instalments, starting in December 2021 viii) The management of Miller Merchandising Company has negotiated with a tenant to rent office space to her beginning November 1. The rental is $624,000 per annum. The first month's rent along with one month's safety deposit is expected to be collected on November 1. Thereafter, monthly rental income becomes due at the beginning month. each 1:48 pm O Type here to search 23/04/2021 近
Snip & Sketch
O New
ix)
Taxation of $85,000 has to be settled in December.
A money market instrument purchased by the company with a face value of $300,000 will
x)
mature on October 15, 2021. In order to meet the financial obligations of the business,
management has decided to liquidate the investment upon maturity. On that date quarterly
interest computed at a rate of 5% per annum is also expected to be collected.
хі)
The cash balance at December 31, 2021 is expected to be an overdraft of $236,000.
Required:
(a)
The business needs to have a sense of its future cashflows 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 October to December.
• A schedule of expected cash disbursements for accounts payable (purchases on account)
for each of the months October to December.
· A cash budget, with a total column, for the quarter ending December 31, 2021, 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 and has asked you to furnish him with the figures for the expected trade
receivables and payables to be included in the statement at December 31, 2021. Is that a
reasonable request? If yes, what should these amounts be?
(c)
Upon receipt of the budget the team manager has now informed you that the management
of Miller Merchandising & More have indicated a desire to maintain a minimum cash
balance of $125,000 each month. Based on the budget prepared, will the business be
achieving this desired target? Given that the management does not wish to borrow any
funds from outside sources, suggest three (3) internal strategies that the business may
employ in order to improve the organization's monthly cash flow. Each strategy must be fully
explained.
1:49 pm
O Type here to search
23/04/2021
Transcribed Image Text:Snip & Sketch O New ix) Taxation of $85,000 has to be settled in December. A money market instrument purchased by the company with a face value of $300,000 will x) mature on October 15, 2021. In order to meet the financial obligations of the business, management has decided to liquidate the investment upon maturity. On that date quarterly interest computed at a rate of 5% per annum is also expected to be collected. хі) The cash balance at December 31, 2021 is expected to be an overdraft of $236,000. Required: (a) The business needs to have a sense of its future cashflows 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 October to December. • A schedule of expected cash disbursements for accounts payable (purchases on account) for each of the months October to December. · A cash budget, with a total column, for the quarter ending December 31, 2021, 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 and has asked you to furnish him with the figures for the expected trade receivables and payables to be included in the statement at December 31, 2021. Is that a reasonable request? If yes, what should these amounts be? (c) Upon receipt of the budget the team manager has now informed you that the management of Miller Merchandising & More have indicated a desire to maintain a minimum cash balance of $125,000 each month. Based on the budget prepared, will the business be achieving this desired target? Given that the management does not wish to borrow any funds from outside sources, suggest three (3) internal strategies that the business may employ in order to improve the organization's monthly cash flow. Each strategy must be fully explained. 1:49 pm O Type here to search 23/04/2021
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