ix) 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.

 

 

Required:

 

(a)              The business needs to have a sense of its future cashflows and therefore requires the preparation of the following:

§ A schedule of budgeted cash collections for trade receivables (sales on account) for each of the months October to December.                                                                  

§ A schedule of expected cash disbursements for accounts payable (purchases on account) for each of the months October to December.                                                   

§ A 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.        

(b)             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 at December 31, 2021. Is that a reasonable request? If yes, what should these amounts be?                         

Upon receipt of the budget the team manager has now informed you that the management of Miller Merchandising & More have indicated a desire to maintain a minimum cash balance of $125,000 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.

vi) vii) viii) In the month of November, an old motor vehicle, which cost $650,000, 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 60% of the selling price in November and the balance settled in two equal amounts in December 2021 & 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 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.