Odane Cranston, the management accountant at BG Merchandising & More, is in theprocess of planning the company's cash needs for the last quarter of 2020. Extracts fromthe sales and purchases budgets are as follows:MonthPurchasesCashSalesSalesOnAccount2020OnAccountAugustSeptemberOctoberNovemberDecember$85,000$75,500$69,870$80,030$63,010$520,000$640,000$760,000$680,000$850,000$420,000$400,000$520,000$440,000$540,000i)An analysis of the records shows that trade receivables (accounts receivable) aresettled according to the following credit pattern, in accordance with the credit terms4/30, n90:60% in the month of sale25% in the first month following the sale15% in the second month following the saleii)Accounts payable are settled as follows, in accordance with the credit terms 2/30,n60;80% in the month in which the inventory is purchased20% in the following monthiii) In the month of November, the management of BG Merchandising expects to sell anold motor vehicle that cost $700,000 to an employee at a gain of $45,000.Accumulated depreciation on this motor vehicle at that time is expected to be$585,000. The employee will be allowed to pay a deposit equal to 50% of the sellingprice in November and the balance will be settled in two equal amounts in December2020 & January 2021iv) A money market instrument purchased by BG Merchandising & More with a facevalue of $440,000 will mature on October 20, 2020. In order to meet the financialobligations of the business, management has decided to liquidate the investmentupon maturity. On that date quarterly interest computed at a rate of 5½% per annumis also expected to be collected. Fixed operating expenses which accrue evenly throughout the year, are estimated tobe $2,160,000 per annum, and are settled monthly. Annual depreciation expense ofnon-current assets of $744,000 will be included in these costs.v)vi) The manager of BG Merchandising & More has negotiated with a tenant for rental ofoffice & storage space to him beginning October 2020. The rental is $780,000 perannum. The first month's rent along with one month's safety deposit will be collectedfrom the tenant on October 1. Thereafter, the monthly rental in expected to bereceived at the beginning of each month.vii) Computer equipment, which is estimated to cost $280,00o, will be acquired inNovember. The manager has agreed with the seller to make a cash deposit of 40% ofthe amount upon signing of the agreement in November, with the balance to besettled in four equal monthly instalments, starting in December 2020viii) Other operating expenses are expected to be $174,000 per quarter and are settledmonthly.ix) Wages and salaries are expected to be $3,156,000 per annum and will be paidmonthly.x)At the recently concluded negotiations between management of BG Merchandisingand the union representing the workers it was agreed that the business should makeretroactive payments in the amount of $1,180,000 to employees. The payment isbeing settled in four equal tranches. The third payment becomes due and payable inOctober of 2020.xi) The cash balance on September 30, 2020, is expected to be an overdraft of $148,000.Required:(a) Prepare a schedule of budgeted cash collections for sales on account for each of themonths October to December 2020(b)Prepare a schedule of expected cash disbursements for purchases on account for thequarter to December 31, 2020.(c)Prepare a cash budget, with a total column, for the quarter ending December 31,2020, showing the receipts & payments for each month.(d)Companies in the industry in which BG Merchandising operates are required tomaintain a minimum cash balance of $120,000 each month. Suggest four (4) possibleinternal measures that may be employed by management to address any expectedshortfall reflected in the budget prepared in part (c) above.

As per rule, allowed to answer first three subparts and post the remaining in the next submission.…

Answered: Sales On Account Account $85,000…

Sales On Account Account $85,000 $75,500 $69,870 $80,030 $63,010 $520,000 $640,000 $760,000 $680,000 $850,000 $420,000 $400,000 $520,000 $440,000 $540,000

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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