You are nearing completion of your first year at Brandybuck, Gamgee & Took, a mid-size accounting firm that specializes in small business consulting. With multiple projects and assignments completed, you are becoming more confident with your team and responsibilities. Your account manager, Jenny Lee, has just wrapped up a team meeting and you are pleased to see a familiar company as your teams next assignment. Your assignment is with Vera's Magic Garden Ltd., a destination greenhouse and formal garden specializing in perennials and herbs. You are informed by Jenny that Vera Topham, the owner and sole shareholder, was very pleased with your work on the financial statements and specifically requested your team to complete the 2023 cash budget and an analysis of the prior years financial statements. Appendix A contains details of purchasing, sales, expenditures, and payments expected for 2023 that were provided by the owner during our initial meeting. Your team will use this information and the comparative financial statements found in appendix B to create a monthly cash budget for the 2023 operating year, which runs January through December. Please ensure to include a cover memo with the budget that explains the components and includes supporting calculations in appendices. Your budget will be used by Matt Lees team as supporting documents to create a set of budgeted financial statements. Your team's second deliverable will be to prepare a report on the companys liquidity, solvency, and profitability based on your analysis of the comparative financial statements found in appendix B. The analysis will be used to support the discussion, conclusions, and any recommendations contained in your report. When creating the report, please keep in mind that the owner is not a professional accountant and may need more explanation using non-technical language than if your answers were addressed solely to me. Your response should conform to our firm's communication and presentation guidelines using Arial 12-point font with normal margins. All outside sources should be properly referenced in the American Psychological Association (APA) style. Draft financial statements, for review purposes, may be completed and forwarded in Excel and memos should be created using Microsoft Word. Please send your work to me for review prior to sending them to the client and Matt's team. ACCT-1071 Case Study #2 Veras Magic Garden Ltd. 3 Appendix A: Notes from Client Meeting The following information was provided by the owner of Veras Magic Garden Ltd. detailing expected sales, collections, purchases, expenditures, payments and financing for the fiscal year, January 01 December 31, 2023. Sales Sales are expected to increase by 5% over 2022 and historically have been earned as follows: January March, October & November 0% April 15% May 30% June 25% July 10% August & September (each month) 5% December 10% Total sales 100% Most sales are cash (30%) and credit card (60%); however, we do some corporate sales (10%) that are billed and collected the following month. Credit card sales are deposited directly to our bank account the next business day less a 4% transaction fee. The only exception to this pattern is December with sales of holiday wreathes and arrangements that are mainly corporate (80%) with the balance from cash sales. Purchases & Cost of Goods Sold Purchases are approximately 35% of total sales. Orders are made in February and a 20% deposit is payable in March. Approximately 60% of orders arrive during April and the balance arrive in early May with the balance owing paid 60 days following receipt. An additional purchase of $35,000 is planned for November for the holiday season and is payable the following January. Although purchases are approximately 35% of sales, cost of goods sold is approximately 38% of sales due to plant loss and end-of-season scrap. Annuals not sold during the season are scrapped as the cost of overwintering cannot be recovered; therefore, inventory consists of pots, soil, fertilizer, trees, shrubs, and perennials that are overwintered for sale next year.

Salaries and wages are expected to increase to $240,000, paid as follows:

i. 50% of salaries and wages expense is incurred during peak season April - July, paid

evenly throughout each month.

ii. 30% of salaries and wages expense is incurred during March, August, September, and

October, paid evenly throughout each month.

iii. 20% of salaries and wages expense is incurred during January, February, November,

and December, paid evenly throughout each month.