covered by insurance, becomes due and payable in April 10. Mahogany Shoe Factory has negotiated with a tenant to rent storage space to him beginning April 1. The rental negotiated is $780,000 per annum. The first month's rent along with one month's safety deposit will be collected from the tenant on April 1. Thereafter, the monthly rental is expected to be received at the beginning of each month. 11. The cash balance on March 31 2016 is expected to be an overdraft of $165,000 Required: a) Prepare a schedule of budgeted cash collections for sales on account for each of the 3 months April to June. b) Prepare a schedule of expected cash disbursements for purchases for the quarter to June 30 2016 c) Prepare a cash budget, with a total column, for the quarter ending June 30, 2016, showing receipts and payments for each month d) Mahogany currently has a loan and one of the covenants is to maintain a minimum cash balance of $150,000 each month. Based on the budget prepared, will the business be meeting this covenant? Suggest four possible steps (other than borrowing) that may be taken by management to improve the cash flow.
covered by insurance, becomes due and payable in April 10. Mahogany Shoe Factory has negotiated with a tenant to rent storage space to him beginning April 1. The rental negotiated is $780,000 per annum. The first month's rent along with one month's safety deposit will be collected from the tenant on April 1. Thereafter, the monthly rental is expected to be received at the beginning of each month. 11. The cash balance on March 31 2016 is expected to be an overdraft of $165,000 Required: a) Prepare a schedule of budgeted cash collections for sales on account for each of the 3 months April to June. b) Prepare a schedule of expected cash disbursements for purchases for the quarter to June 30 2016 c) Prepare a cash budget, with a total column, for the quarter ending June 30, 2016, showing receipts and payments for each month d) Mahogany currently has a loan and one of the covenants is to maintain a minimum cash balance of $150,000 each month. Based on the budget prepared, will the business be meeting this covenant? Suggest four possible steps (other than borrowing) that may be taken by management to improve the cash flow.
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...
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