The management accountant at Long Pond Electronics Company, Robert Miles, is in the process of preparing the cash budget for the business for the quarter ending December 31, 2016. Extracts from the sales and purchases budgets are as follows: Month 2016 Cash Sales Sales On Account Purchases On Account August $121,000 $480,000 $390,000 September $95,500 $600,000 $360,000 October $110,580 $720,000 $480,000 November $125,900 $650,000 $400,000 December $156,750 $800,000 $500,000 (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 5/30, n90: 60% in the month of sale 30% in the first month following the sale 10% in the second month following the sale (ii) Accounts payable are settled as follows, in accordance with the credit terms 3/30, n60: 80% in the month in which the inventory is purchased 20% in the following month (iii) During December, the management of Long Pond Electronics expects to sell an old 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 $345,000. The employee will be allowed to pay a deposit equal to 65% of the selling price in December and the balance settled in two equal amounts in January & February of 2017. (iv) Furniture and Fixtures, which is estimated to cost $240,750, will be purchased for cash in December. (v) A long-term bond purchased by Long Pond Electronics with a face value of $500,000 will mature on October 20, 2016. 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 6% per annum is also expected to be collected.

Page 2 (vi) 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. (vii) Other operating expenses are expected to be $171,000 per quarter and are settled monthly. (viii) The management of Long Pond has negotiated with a tenant to rent office space to her beginning November 1. The rental is $540,000 per annum. The first months rent along with one months safety deposit is expected to be collected on November 1. Thereafter, monthly rental income becomes due at the beginning of each month. (ix) Wages and salaries are expected to be $2,880,000 per annum and will be paid monthly. (x) At the recently concluded negotiations between management and the union representing the workers it was agreed that Long Pond Electronics should make retroactive payments in the amount of $1,500,000 to employees. The payment is being settled in four equal tranches. The third payment becomes due and payable in October of 2016. (xi) The cash balance on September 30, 2016 is expected to be an overdraft of $155,000 Required: (a) Prepare a schedule of budgeted cash collections for sales for each of the months October to December, 2016. (b) Prepare a schedule of expected cash disbursements for purchases for the quarter to December 31, 2016. (c) Prepare a cash budget, with a total column, for the quarter ending December 31, 2016, showing the receipts and payments for each month.

(d) Companies in the industry in which Long Pond Electronics operates are required to maintain a minimum cash balance of $145,000 each month. Based on the budget prepared, will the business be meeting this requirement? Suggest three (3) possible steps (other than borrowing), that may be taken by the management of the company to improve the organizations cash flow.