You are the management accountant of the entity and have been given the task of preparing the cash budget for the business for the quarter ending September 30, 2022. Your data collection has yielded the following:

Extracts from the sales and purchases budgets are as follows:

Month Cash Sales Cash Purchases

Sales On Account Purchases On Account

May $75,000 $480,000 $390,000

June $135,000 $600,000 $36,000 $360,000

July $86,800 $720,000 $61,700 $450,000

August $105,600 $640,000 $68,800 $400,000

September $112,500 $800,000 $77,250 $500,000

ii) An analysis of the records shows that trade receivables (accounts receivable) for sales on account are settled according to the following credit pattern, in accordance with the credit terms 5/30, n90:

50% in the month of sale

35% in the first month following the sale

15% in the second month following the sale

iii) Accounts Payable are settled as follows, in accordance with the credit terms 4/30, n60:

70% in the month in which the inventory is purchased

30% in the following month

iv) Computer equipment, which is estimated to cost $350,000, will be acquired in August. The manager has planned with the supplier to make a cash deposit of 50% of the amount upon signing of the agreement in August, with the balance to be settled in four equal monthly instalments, starting in September 2022.

v) A treasury bond purchased by the company with a face value of $560,000 is expected to mature on July 20, 2022. To meet the financial obligations of the business the management team has decided to liquidate the investment upon maturity. On that date, quarterly interest computed at a rate of 7 % per annum is also expected to be collected.

vi) Fixed operating expenses, which accrue evenly throughout the year, are estimated to be $1,812,000 per annum [including depreciation on non-current assets of $37,000 per month] and are settled monthly.

vii) Management has negotiated with a tenant for rental of storage space beginning on July 1. The rental is expected to be $840,000 per annum and will be paid over by the tenant quarterly in advance. Rental relating to the quarter under review becomes due on July 1.

viii) Other operating expenses are expected to be $432,000 per annum and will be settled monthly.

ix) Wages and salaries are expected to be $2,304,000 per annum and will be paid monthly.

x) In the month of August, products, which cost $455,000, will be sold to an employee at a loss of $20,000. Accumulated depreciation on the products at that time is expected to be $305,000. The employee will be allowed to pay a deposit equal to 60% of the selling price in August with the balance settled in two equal amounts in September & October.

xi) As part of its investing activities, management is in the process of completing a major addition to the business property, which is estimated to cost $1,200,000, and which is being funded by external borrowing. $420,000 of the principal, along with interest of $14,200 is due to be paid on July 15, 2022.

xii) The cash balance on September 30, 2022, is expected to be an overdraft of $147,500.

The business needs to have a sense of its future cash flows 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 July to September.

A schedule of expected cash disbursements for accounts payable (purchases on account) for each of the months July to September.

A cash budget, with a total column, for the quarter ending September 30, 2022, 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.