Please assist Toyota & Sons is a family-owned auto-parts store. You are the management accountant of theconcern and have been given the task of preparing the cash budget for the business for thequarter ending March 31, 2024. Your data collection has yielded the following:(i) Extracts from the sales and purchases budgets are as follows:MonthSalesOnAccount(ii)(iii)(iv)November 2023 - March 2024NovemberDecemberJanuaryFebruaryMarchCashSales$151,100$480,000$375,000$145,500 $600,000 $360,000$159,025 $700,000 $508,000$169,350 $650,000 $400,000$176,200 $800,000 $521,000PurchasesAn analysis of the records shows that trade receivables (accounts receivable) are settledaccording to the following credit pattern, in accordance with the credit terms 2/30, n90:45% in the month of sale30% in the first month following the sale.25% in the second month following the sale.Expected purchases include cash purchases of $28,000 in January and $21, 000 in March.All other purchases are on account. Accounts payable are settled as follows, in accordancewith the credit terms 4/30, n60:75% in the month in which the inventory is purchased.25% in the following monthThe management of Toyota & Sons is in the process of upgrading its fleet of motor vehicles.During March the company expects to sell an old Cresida motor vehicle that cost $500,000at a gain of $45,000. Accumulated depreciation on this motor vehicle at that time isexpected to be $340,000. The employee will be allowed to pay a deposit equal to 60% ofthe selling price in March; the balance will be settled in two equal amounts in April & May of2024.(v)An air conditioning unit, which is estimated to cost $300,000, will be purchased in February.The manager has planned with the suppliers to make a cash deposit of 40% upon signing ofthe agreement in February. The balance will be settled in four (4) equal monthly instalmentsbeginning March 2024.(vi)A long-term bond purchased by Toyota & Sons 4 years ago, with a face value of $500,000will mature on January 20, 2024. To meet the financial obligations of the business,management has decided to liquidate the investment upon maturity. On that date quarterlyinterest computed at a rate of 5½% per annum is also expected to be collected.(vii) Fixed operating expenses which accrue evenly throughout the year, are estimated to be$2,016,000 per annum, [including depreciation on non-current assets of $42,000 per month]and are settled monthly.(viii) Other operating expenses are expected to be $177,000 per quarter and are settled monthly. (ix)(x)(xi)(xii)(a)Required:The business needs to have a sense of its future cashflows and therefore requires thepreparation of the following:(b)(c)The management of Toyota & Sons has negotiated with a tenant to rent office space to herbeginning February 1. The rental is $540,000 per annum. The first month's rent along withone month's safety deposit is expected to be collected on February 1. Thereafter, monthlyrental income becomes due at the beginning of each month.Wages and salaries are expected to be $2,976,000 per annum and will be paid monthly.■As part of its investing activities, the management of Toyota & Sons has just concluded anexpansion project relating to the business's storage facilities. The project required capitaloutlay of $1,800,000 and was funded by a loan from a family member, who is a partner inthe business. $340,000 of the principal along with interest of $35,000 will become due andpayable in January 2024.The cash balance on March 31, 2024, is expected to be an overdraft of $98,000.A schedule of budgeted cash collections for trade receivables for each of the monthsJanuary to March.A schedule of expected cash disbursements for accounts payable for each of the monthsJanuary to March.A cash budget, with a total column, for the quarter ending March 31, 2024, showing theexpected cash receipts and payments for each month and the ending cash bala ce for eachof the three months, given that no financing activities took place.Another team member who is preparing the Budgeted Balance Sheet for the business forthe same quarter and has asked you to furnish him with the figures for the expected tradereceivables and payables to be included in the statement. Is that a reasonable request? Ifyes, what should these amounts be?Upon receipt of the budget, the team manager, Hilux James, has now informed you that, inkeeping with industry players, the management of Toyota & Sons have indicated an industryrequirement to maintain a minimum cash balance of $155,000 each month. He has alsonoted that management is very keen on keeping the gearing ratio of the business as low aspossible 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? Suggestthree (3) internal strategies that may be employed by management to improve theorganization's monthly cash flow and militate against or reduce any possible shortfallreflected in the budget prepared. Each strategy must be fully explained.

A cash budget is an estimate of a corporation's cash flows for a given time span. A cash budget is…

Toyota & Sons is a family-owned auto-parts store. You are the management accountant of the concern and have been given the task of preparing the cash budget for the business for the quarter ending March 31, 2024. Your data collection has yielded the following: (i) Extracts from the sales and purchases budgets are as follows: Month Sales On Account (ii) (iii) (iv) November 2023 - March 2024 November December January February March Cash Sales $151,100 $480,000 $375,000 $145,500 $600,000 $360,000 $159,025 $700,000 $508,000 $169,350 $650,000 $400,000 $176,200 $800,000 $521,000 Purchases An analysis of the records shows that trade receivables (accounts receivable) are settled according to the following credit pattern, in accordance with the credit terms 2/30, n90: 45% in the month of sale 30% in the first month following the sale. 25% in the second month following the sale. Expected purchases include cash purchases of $28,000 in January and $21, 000 in March. All other purchases are on account. Accounts payable are settled as follows, in accordance with the credit terms 4/30, n60: 75% in the month in which the inventory is purchased. 25% in the following month The management of Toyota & Sons is in the process of upgrading its fleet of motor vehicles. During March the company expects to sell an old Cresida motor vehicle that cost $500,000 at a gain of $45,000. Accumulated depreciation on this motor vehicle at that time is expected to be $340,000. The employee will be allowed to pay a deposit equal to 60% of the selling price in March; the balance will be settled in two equal amounts in April & May of 2024. (v) An air conditioning unit, which is estimated to cost $300,000, will be purchased in February. The manager has planned with the suppliers to make a cash deposit of 40% upon signing of the agreement in February. The balance will be settled in four (4) equal monthly instalments beginning March 2024

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q