In early July 2020, Leonora Kevill-Davies, the Chief Executive Officer (CEO) of Nutravalu Foods, a Toronto-based company dedicated to ensuring the purity and quality of its diverse range of health food products, was considering the future of her family-owned business. The company had experienced great success since its inception in 2011, but Nutravalu was now planning to expand its operations into other parts of the country. Leonora knew expansion would be successful only if the company had a good cash management policy, and has asked Otto Semmler, the companys Chief Accountant (CA) for a cash budget for the current month (July 2020). Otto has collected the following pieces of information in order to prepare the cash budget:

a) The cash balance on July 1 is $44,000.

b) Actual sales for May and June and expected sales for July are shown below.

Sales on account are collected over a three-month period as follows: 20% collected in the month of sale, 60% collected in the month following sale, and 10% collected in the second month following sale. The remaining 10% is uncollectible.

c)The company maintains a minimum cash balance of $14,000. An open line of credit is available from Ontario and Saskatchewan Banking Corporation (OSBC), the companys bank, to borrow from if needed, in order to maintain this minimum cash balance.

d) A new high-tech food commercial food processor costing $95,000 will be bought for cash during July, and employee bonuses totalling $11,300 will be paid during the month.

e) Purchase of inventory will total $300,000 for July. 50% of a months inventory purchases are paid during the month of purchase. The accounts payable remaining from Junes inventory purchases total $157,000, all of which will be paid in July.

f)Selling and administrative expenses are budgeted at $457,000 for July. Of this amount $41,000 is for depreciation.

Required: 1. Prepare a schedule of expected cash collections in July. 6.5 marks 2. Prepare a schedule of expected cash disbursements during July for merchandise purchases. 4 marks 3. Prepare a cash budget for July. Indicate in the financing section any borrowing that will be needed during

the month. Assume that any interest will not be paid until the following month (August). 9.5 marks

Cash sales Sales on account May $64,000 $480,000 June $72,000 $588,000 July $90,000 $640,000 Cash sales Sales on account May $64,000 $480,000 June $72,000 $588,000 July $90,000 $640,000