cash budget, with a total column, for the quarter ending December 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.
The management accountant at Hiller Herchandlslng 8: More, Gdail Russell is in the process of preparing the cash budget for the business for the fourth quarter of 2021. It is customary for the business to borrow money during this quarter. Extracts from the sales and purchases budgets are as follows: Cash Sales Sales an Account Purchases August $05,000 $040,000 $420,000 September $?0,000 $550,000 $550,000 October $00,550 $000,000 $500,000 November $?7, 100 $000,000 $000,000 I) II) III} Iv} vl} vll] December $174,0'i'0 $500,000 $450,000 An analysis of the records shows that trade receivables are settled according to the following credit pattern, in accordance with the credit icons 4230, n00: 50% in the month of sale 30% in the rst month following the sale 20% in the second month following the sale Expected purchases include monthly cash purchases of 5%. All other purchases are on account. Accounts payable are settled as follows, in accordance with the credit fenns EH30, n60: 00% in the month in wl'iich the inventory is purchased 40% in the following month Fixed operating expenses which accrue evenly throughout the year, are estimated to be $1,000,000 per annum, {inciuding depreciation on non-current assets of $420,000 per annum) and is settled monthly. Wages and salaries are expected to be $2,200,000 per annum and will be paid monthly. Other operating expenses are expected to be $100,000 per quarter and will be settled monthly. In the month of November, an old motor vehicle, which cost $050,000, will be sold to an employee at a gain of $30,000. Accumulated depreciation on the motor vehicle at that time is expected to be $540,000. The employee will be allowed to pay a deposit equal to 00% of the selling price in November and the balance settled in two equal amounts in December 2021 a January of 2022. Computer equipment, which is estimated to cost $320,000, will be acquired in November. The manager has made arrangements with the dealer to make a cash deposit of 50% of the amount upon signing of the agreement in November, with the balance to be settled in four equal monthly instalments, starting in December 2021 vili) The management of Miller Merchandising Company has negotiated with a tenant to rent office space to her beginning November 1. The rental is $624,000 per annum. The first month's rent along with one month's safety deposit is expected to be collected on November 1. Thereafter, monthly rental income becomes due at the beginning of each month. 1X) Taxation of $85,000 has to be settled in December. x) A money market instrument purchased by the company with a face value of $300,000 will mature on October 15, 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. xi) The cash balance at December 31, 2021 is expected to be an overdraft of $236,000
