FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
REQUIRED:
The business needs to have a sense of its future
- 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 for each of the months January to March.
- A
cash budget , with a total column, for the quarter ending March 31, 2023, 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.
SHOW THE WORKINGS
Transcribed Image Text:Varsity Supplies & Things is a family-owned store. The business is now approaching the end of
the year and is desirous of identifying its expected cash inflows and outflows for the first quarter of
the new year. You are the management accountant of the entity and have been tasked to prepare
the cash budget for the business for the quarter ending March 31, 2023. The following data is
available:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Extracts from the sales and purchases budgets are as follows:
Month
Cash
Sales
On
2022 2023
Sales
Account
$480,000
$600,000
$650,000
$700,000
$800,000
November 2022
December 2022
January 2023
February 2023
March 2023
$142,100
$165,500
$171,475
$144,940
$236,720
Cash
Purchases
$25,800
$44,625
$30,400
$55,100
55% in the month of sale
35% in the first month following the sale
8% in the second month following the sale
The remaining 2% is expected to be uncollectible
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 4/30, n90:
Purchases
On
Account
$345,000
$380,000
$400,000
$480,000
$540,000
Accounts payable are settled as follows, in accordance with the credit terms 2/30, n60:
85% in the month in which the inventory is purchased
15% in the following month
The management of Varsity Supplies & Things has negotiated with a tenant to sublet office
space to her beginning February 1. The rental is expected to be $576,000 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.
Office Furniture & Fixtures, which is estimated to cost $350,000, will be purchased in
February. The manager has made arrangement with the suppliers to make a cash deposit of
40% upon signing of the agreement in February. The balance will be settled in five (5) equal
monthly instalments beginning March of 2023.
The management of Varsity Supplies & Things is in the process of upgrading its fleet of
motor vehicles. During February the business expects to sell an old delivery motor van that
cost $720,000 at a loss of $45,000 to an employee. Accumulated depreciation on this motor
van at that time is expected to be $375,000. The employee will be allowed to pay a deposit
equal to 50% of the selling price in February; the balance will be settled in two equal
amounts 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 per
annum 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.
Continued..
Transcribed Image Text:Continued..
(ix)
A long-term bond purchased by Varsity Supplies & Things two (2) years ago, with a face
value of $450,000 will mature on January 15, 2023. To meet the financial obligations of the
business, management has decided to liquidate the investment upon maturity. On that date
semi-annual interest computed at a rate of 81% per annum is also expected to be collected
(x)
(xi)
(xii)
As part of its investing activities, the management of Varsity Supplies & Things has just
concluded an expansion project relating to the business's storage facilities. The project
required capital outlay of $1,600,000 and was funded by a loan from a family member, who
is a silent partner in the business. $320,000 of the principal along with interest of $35,000
will become due and payable on January 25, 2023.
Wages and salaries are expected to be $3,384,000 per annum and will be paid monthly.
The cash balance on March 31, 2023, is expected to be an overdraft of $248,000
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Follow-up Questions
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Follow-up Question
Another team member who is preparing the Budgeted
the same quarter ending March 31, 2023 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?
Solution
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Follow-up Questions
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Follow-up Question
Another team member who is preparing the Budgeted
the same quarter ending March 31, 2023 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?
Solution
by Bartleby Expert
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Similar questions
- how about these 3 requirments Prepare a direct materials budget for the first quarter of the financial year ending 30 September 2022. Prepare a cash budget for the first quarter of the financial year ending 30 September 2022 including any necessary schedules. Prepare a budgeted income statement for the first quarter of the financial year ending 30 September 2022.arrow_forwardCash budgeting is critical to a company’s financial information needs. The following information was extracted from the records of A & B Manufacturing Company Limited. The opening cash balances on January 01, 2021 was expected to be $30,000. The budgeted sales were as follows: Budgeted Sales Month Year $ November 2020 80,000 December 2020 90,000 January 2021 80,000 February 2021 75,000 March 2021 60,000 April 2021 70,000 Analysis of records shows that debtors settle according to the following pattern: 70% within the month of sale 30% the following month Extracts of the purchases budget were as follows: Purchases budget Month Year $ December 2020 65,000 January 2021 50,000 February 2021 75,000 March…arrow_forward
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