PLEASE ANSWER ALL QUESTIONS SOONEST!Required:(a) The business needs to have a sense of its future cash inflows and outflows for the quarterand therefore requires the preparation of the following:▪ 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, 2023, showing theexpected cash receipts and payments for each month and the ending cash balance for eachof the three months, given that no financing activities took place. (b) Another team member who is preparing the Budgeted Balance Sheet for the business forthe same quarter ending March 31, 2023 and has asked you to furnish him with the figuresfor the expected trade receivables and payables to be included in the statement. Is that areasonable request? If yes, what should these amounts be? (c) Upon receipt of the budget, the team manager, Damion Brownie, has now informed youthat, in keeping with industry players, the management of Varsity Supplies & Things haveindicated an industry requirement to maintain a minimum cash balance of $162,000 eachmonth. He has also noted that management is very keen on keeping the gearing ratio of thebusiness as low as possible and would therefore prefer to cushion any gaps internally usingequity 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. Varsity Supplies & Things is a family-owned store. The business is now approaching the end ofthe year and is desirous of identifying its expected cash inflows and outflows for the first quarter ofthe new year. You are the management accountant of the entity and have been tasked to preparethe cash budget for the business for the quarter ending March 31, 2023. The following data isavailable:(1)(iii)Extracts from the sales and purchases budgets are as follows:MonthSalesOn2022 - 2023(v)November 2022December 2022January 2023February 2023March 20233CashSales$142,100$165,500$171,475$144,940$236,720Account$480,000$600,000$650,000$700,000$800,000CashPurchases$25,800$44,625$30,400$55,100(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 4/30, n90:55% in the month of sale35% in the first month following the sale8% in the second month following the saleThe remaining 2% is expected to be uncollectiblePurchasesOnAccount$345,000$380,000$400,000Accounts payable are settled as follows, in accordance with the credit terms 2/30, n60:85% in the month in which the inventory is purchased15% in the following month(iv) The management of Varsity Supplies & Things has negotiated with a tenant to sublet officespace to her beginning February 1. The rental is expected to be $576,000 per annum. Thefirst month's rent along with one month's safety deposit is expected to be collected onFebruary 1. Thereafter, monthly rental income becomes due at the beginning of eachmonth.$480,000$540,000Office Furniture & Fixtures, which is estimated to cost $350,000, will be purchased inFebruary. The manager has made arrangement with the suppliers to make a cash deposit of40% upon signing of the agreement in February. The balance will be settled in five (5) equalmonthly instalments beginning March of 2023.(vi)The management of Varsity Supplies & Things is in the process of upgrading its fleet ofmotor vehicles. During February the business expects to sell an old delivery motor van thatcost $720,000 at a loss of $45,000 to an employee. Accumulated depreciation on this motorvan at that time is expected to be $375,000. The employee will be allowed to pay a depositequal to 50% of the selling price in February; the balance will be settled in two equalamounts in March & April of 2023.(vii) Fixed operating expenses which accrue evenly throughout the year, are estimated to be$2,088,000 per annum, which include depreciation on non-current assets of $504,000 perannum and are expected to be settled monthly.(viii) Other operating expenses which accrue evenly throughout the year are expected to be$672,000 per annum and will be settled monthly. (ix) A long-term bond purchased by Varsity Supplies & Things two (2) years ago, with a facevalue of $450,000 will mature on January 15, 2023. To meet the financial obligations of thebusiness, management has decided to liquidate the investment upon maturity. On that datesemi-annual interest computed at a rate of 83% per annum is also expected to be collected(x) As part of its investing activities, the management of Varsity Supplies & Things has justconcluded an expansion project relating to the business's storage facilities. The projectrequired capital outlay of $1,600,000 and was funded by a loan from a family member, whois a silent partner in the business. $320,000 of the principal along with interest of $35,000will become due and payable on January 25, 2023.(xi)Wages and salaries are expected to be $3,384,000 per annum and will be paid monthly.(xii) The cash balance on March 31, 2023, is expected to be an overdraft of $248,000

Question

PLEASE ANSWER ALL QUESTIONS SOONEST!Required:(a) The business needs to have a sense of its future cash inflows and outflows for the quarterand therefore requires the preparation of the following:▪ 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, 2023, showing theexpected cash receipts and payments for each month and the ending cash balance for eachof the three months, given that no financing activities took place. (b) Another team member who is preparing the Budgeted Balance Sheet for the business forthe same quarter ending March 31, 2023 and has asked you to furnish him with the figuresfor the expected trade receivables and payables to be included in the statement. Is that areasonable request? If yes, what should these amounts be?  (c) Upon receipt of the budget, the team manager, Damion Brownie, has now informed youthat, in keeping with industry players, the management of Varsity Supplies & Things haveindicated an industry requirement to maintain a minimum cash balance of $162,000 eachmonth. He has also noted that management is very keen on keeping the gearing ratio of thebusiness as low as possible and would therefore prefer to cushion any gaps internally usingequity 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. Varsity Supplies & Things is a family-owned store. The business is now approaching the end ofthe year and is desirous of identifying its expected cash inflows and outflows for the first quarter ofthe new year. You are the management accountant of the entity and have been tasked to preparethe cash budget for the business for the quarter ending March 31, 2023. The following data isavailable:(1)(iii)Extracts from the sales and purchases budgets are as follows:MonthSalesOn2022 - 2023(v)November 2022December 2022January 2023February 2023March 20233CashSales$142,100$165,500$171,475$144,940$236,720Account$480,000$600,000$650,000$700,000$800,000CashPurchases$25,800$44,625$30,400$55,100(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 4/30, n90:55% in the month of sale35% in the first month following the sale8% in the second month following the saleThe remaining 2% is expected to be uncollectiblePurchasesOnAccount$345,000$380,000$400,000Accounts payable are settled as follows, in accordance with the credit terms 2/30, n60:85% in the month in which the inventory is purchased15% in the following month(iv) The management of Varsity Supplies & Things has negotiated with a tenant to sublet officespace to her beginning February 1. The rental is expected to be $576,000 per annum. Thefirst month's rent along with one month's safety deposit is expected to be collected onFebruary 1. Thereafter, monthly rental income becomes due at the beginning of eachmonth.$480,000$540,000Office Furniture & Fixtures, which is estimated to cost $350,000, will be purchased inFebruary. The manager has made arrangement with the suppliers to make a cash deposit of40% upon signing of the agreement in February. The balance will be settled in five (5) equalmonthly instalments beginning March of 2023.(vi)The management of Varsity Supplies & Things is in the process of upgrading its fleet ofmotor vehicles. During February the business expects to sell an old delivery motor van thatcost $720,000 at a loss of $45,000 to an employee. Accumulated depreciation on this motorvan at that time is expected to be $375,000. The employee will be allowed to pay a depositequal to 50% of the selling price in February; the balance will be settled in two equalamounts in March & April of 2023.(vii) Fixed operating expenses which accrue evenly throughout the year, are estimated to be$2,088,000 per annum, which include depreciation on non-current assets of $504,000 perannum and are expected to be settled monthly.(viii) Other operating expenses which accrue evenly throughout the year are expected to be$672,000 per annum and will be settled monthly. (ix) A long-term bond purchased by Varsity Supplies & Things two (2) years ago, with a facevalue of $450,000 will mature on January 15, 2023. To meet the financial obligations of thebusiness, management has decided to liquidate the investment upon maturity. On that datesemi-annual interest computed at a rate of 83% per annum is also expected to be collected(x) As part of its investing activities, the management of Varsity Supplies & Things has justconcluded an expansion project relating to the business's storage facilities. The projectrequired capital outlay of $1,600,000 and was funded by a loan from a family member, whois a silent partner in the business. $320,000 of the principal along with interest of $35,000will become due and payable on January 25, 2023.(xi)Wages and salaries are expected to be $3,384,000 per annum and will be paid monthly.(xii) The cash balance on March 31, 2023, is expected to be an overdraft of $248,000

Accepted Answer

The cash budget is an estimation of the total receipt and payment during the specific year.