Required:Prepare the following: A schedule of budgeted cash collections for trade receivables for each of the months January to March. A schedule of expected cash disbursements for accounts payable (purchases on account) for each of the months January to March. A cash budget, with a total column, for the quarter ending March 31, 2021, showing the expected cash receipts and payments for each month and the ending cash balance for each of the three months, given that no financing activities took place. 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 has now informed you that the management of G & J Merchandising & More have indicated a desire to maintain a minimum cash balance of $155,000 each month. Based on the budget prepared, will the business be achieving this desired target? Given that the management does not wish to borrow any funds from outside sources, suggest three (3) internal strategies that the business may employ in order to improve the organization’s monthly cash flow. Each strategy must be fully explained. Question Continued.(ix)The management of G& J Merchandising & More has negotiated with a tenant to rent officespace to her beginning February 1. The rental is $540,000 per annum. The first month'srent 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.(x)Wages and salaries are expected to be $2,976,000 per annum and will be paid monthly.(xi) As part of its investing activities, the management of G & J Merchandising & More has justconcluded an expansion project relating to the business's storage facilities. The projectrequired capital outlay of $1,800.000 and was funded by a loan from a family member, whois a partner in the business. $340,000 of the principal along with interest of $35,000 willbecome due and payable in January 2021.(xii) The cash balance on March 31, 2021 is expected to be an overdraft of $92.000 G&J Merchandising & More is a family-owned auto-parts store. You are the managementaccountant of the concern and have been given the task of preparing the cash budget for thebusiness for the quarter ending March 31, 2021. Your data collection has yielded the following:(i)Extracts from the sales and purchases budgets are as follows:SalesOnAccountMonthCashPurchasesSalesNovember 2020 - March 2021NovemberDecemberJanuaryFebruaryMarch$151.100$145,500$159,025$169,350$176,200$480,000$600,000$700,000$650,000$800,000$390.000$360,000$505,000$400,000$518.000(i) 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 sale25% in the second month following the sale(ii) Expected purchases include cash purchases of $25.000 in January and $18,000 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 purchased25% in the following month(iv) The management of G & J Merchandising & More is in the process of upgrading its fleet ofmotor vehicles. During March the company expects to sel an old Toyota Corolla motorvehicle that cost $500,000 at a gain of $45,000. Accumulated depreciation on this motorvehicle at that time is expected to be $340.000. The employee will be allowed to pay adeposit equal to 80% of the selling price in March; the balance will be settled in two equalamounts in April & May of 2021.(v)An air conditioning unit, which is estimated to cost $300.000, will be purchased in February.The manager has made arrangements 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) equalmonthly instalments beginning March 2021.(vi) A long-term bond purchased by G& J Merchandising & More 4 years ago, with a face valueof $500,000 will mature on January 20, 2021. In order to meet the financial obligations ofthe business, management has decided to liquidate the investment upon maturity. On thatdate quarterly interest computed at a rate of 5%% per annum is also expected to becollected.(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.

Cash collection Budget: The Schedule of expected cash collections from customers shows the budgeted…

Required: Prepare the following: A schedule of budgeted cash collections for trade receivables for each of the months January to March. A schedule of expected cash disbursements for accounts payable (purchases on account) for each of the months January to March. A cash budget, with a total column, for the quarter ending March 31, 2021, showing the expected cash receipts and payments for each month and the ending cash balance for each of the three months, given that no financing activities took place. 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 has now informed you that the management of G & J Merchandising & More have indicated a desire to maintain a minimum cash balance of $155,000 each month. Based on the budget prepared, will the business be achieving this desired target? Given that the management does not wish to borrow any funds from outside sources, suggest three (3) internal strategies that the business may employ in order to improve the organization’s monthly cash flow. Each strategy must be fully explained.

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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Prepare the following:

A schedule of budgeted cash collections for trade receivables for each of the months January to March.

A schedule of expected cash disbursements for accounts payable (purchases on account) for each of the months January to March.

A cash budget, with a total column, for the quarter ending March 31, 2021, showing the expected cash receipts and payments for each month and the ending cash balance for each of the three months, given that no financing activities took place.

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 has now informed you that the management of G & J Merchandising & More have indicated a desire to maintain a minimum cash balance of $155,000 each month. Based on the budget prepared, will the business be achieving this desired target? Given that the management does not wish to borrow any funds from outside sources, suggest three (3) internal strategies that the business may employ in order to improve the organization’s monthly cash flow. Each strategy must be fully explained.

Question Continued.
(ix)
The management of G& J Merchandising & More 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.
(x)
Wages and salaries are expected to be $2,976,000 per annum and will be paid monthly.
(xi) As part of its investing activities, the management of G & J Merchandising & More 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 2021.
(xii) The cash balance on March 31, 2021 is expected to be an overdraft of $92.000

G&J Merchandising & More 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, 2021. Your data collection has yielded the following:
(i)
Extracts from the sales and purchases budgets are as follows:
Sales
On
Account
Month
Cash
Purchases
Sales
November 2020 - March 2021
November
December
January
February
March
$151.100
$145,500
$159,025
$169,350
$176,200
$480,000
$600,000
$700,000
$650,000
$800,000
$390.000
$360,000
$505,000
$400,000
$518.000
(i) 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
(ii) Expected purchases include cash purchases of $25.000 in January and $18,000 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
(iv) The management of G & J Merchandising & More is in the process of upgrading its fleet of
motor vehicles. During March the company expects to sel an old Toyota Corolla 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 80% of the selling price in March; the balance will be settled in two equal
amounts in April & May of 2021.
(v)
An air conditioning unit, which is estimated to cost $300.000, will be purchased in February.
The manager has made arrangements 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 2021.
(vi) A long-term bond purchased by G& J Merchandising & More 4 years ago, with a face value
of $500,000 will mature on January 20, 2021. In order 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%% 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.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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