(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. Is that a reasonable request? If yes, what should these amounts be?(c) Upon receipt of the budget, the team manager, Hilux James, has now informed you that, in keeping with industry players, the management of Toyota & Sons have indicated an industry requirement to maintain a minimum cash balance of $155,000 each month. He 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. Question Continued............(ix) 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.(x)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.(xii) The cash balance on March 31, 2024, is expected to be an overdraft of $98,000.(xi) 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:MonthSalesOnAccountNovember 2023 March 2024NovemberDecember(iv)JanuaryFebruaryMarchCashSales$151,100 $480,000$145,500 $600,000Purchases$159,025 $700,000 $508,000$169,350$650,000$400,000$176,200 $800,000 $521,000(ii) An 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.$375,000$360,00075% in the month in which the inventory is purchased.25% in the following monthExpected 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: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 $500,000at 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 5%2% 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.Continued................

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

Answered: (b) Another team member who is…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter9: Profit Planning And Flexible Budgets

Section: Chapter Questions

Problem 45BEB: Pilsner Inc. purchases raw materials on account for use in production. The direct materials...

See similar textbooks

Related questions

Question

100%

(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. Is that a reasonable request? If yes, what should these amounts be?

(c) Upon receipt of the budget, the team manager, Hilux James, has now informed you that, in keeping with industry players, the management of Toyota & Sons have indicated an industry requirement to maintain a minimum cash balance of $155,000 each month. He 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.

Question Continued............
(ix) The management of Toyota & Sons has negotiated with a tenant to rent office space to her
beginning February 1. The rental is $540,000 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.
Wages and salaries are expected to be $2,976,000 per annum and will be paid monthly.
(x)
As part of its investing activities, the management of Toyota & Sons has just concluded an
expansion project relating to the business's storage facilities. The project required capital
outlay of $1,800,000 and was funded by a loan from a family member, who is a partner in
the business. $340,000 of the principal along with interest of $35,000 will become due and
payable in January 2024.
(xii) The cash balance on March 31, 2024, is expected to be an overdraft of $98,000.
(xi)

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
November 2023 March 2024
November
December
(iv)
January
February
March
Cash
Sales
$151,100 $480,000
$145,500 $600,000
Purchases
$159,025 $700,000 $508,000
$169,350
$650,000
$400,000
$176,200 $800,000 $521,000
(ii) 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.
$375,000
$360,000
75% in the month in which the inventory is purchased.
25% in the following month
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:
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.
(vi)
A long-term bond purchased by Toyota & Sons 4 years ago, with a face value of $500,000
will 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 quarterly
interest computed at a rate of 5%2% 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.
Continued................

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 5 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Follow-up Questions

Read through expert solutions to related follow-up questions below.

Follow-up Question

How did you get other operating expenses to be 44250. I have it as 177000/3 which is 59000

Solution

by Bartleby Expert

SEE SOLUTION

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.