(ix) A long-term bond purchased by Pelican Merchandising 2 years ago, with a face value of $450,000...
Question:
(ix) A long-term bond purchased by Pelican Merchandising 2 years ago, with a face value of $450,000 will mature on January 15, 2022. To meet the financial obligations of the business, management has decided to liquidate the investment upon maturity. On that date semi-annual interest computed at a rate of 8?% per annum is also expected to be collected.
(x) A compensation payment of $355,000 to a former employee for a back injury sustained in an accident in the business storage facility, not covered by insurance, becomes due and payable on January 25, 2022.
(xi) Wages and salaries are expected to be $3,264,000 per annum and will be paid monthly. (xii) The cash balance on March 31, 2022 is expected to be an overdraft of $253,000
Prepare the following:
A schedule of budgeted cash collections for trade receivables (sales on account) for each of the months January to March.
? A schedule of expected cash disbursements for accounts payable (purchases on account) for each of the months January to March.
? A cash budget, with a total column, for the quarter ending March 31, 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.
?Pelican Merchandising & More is a family-owned store. The business is now approaching the end of the year and is in the process of identifying its cash needs for the first quarter of the new year. You are the management accountant of the entity and have been tasked to prepare the cash budget for the business for the quarter ending March 31, 2022. (i) Extracts from the sales and purchases budgets are as follows: Month Cash Sales Sales On Account Cash Purchases On 2021 - 2022 Purchases Account $138,100 $156,500 $170,975 $135,740 $480,000 $600,000 $650,000 $700,000 $345,000 $380,000 $400,000 $480,000 November 2021 $25,800 $44,625 $30,400 December 2021 January 2022 February 2022 March 2022 $226,420 $800,000 $55,100 $540,000 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 4/30, n90: (ii) 55% in the month of sale 35% in the first month following the sale 8% in the second month following the sale The remaining 2% is expected to be uncollectible (iii) Accounts payable are settled as follows, in accordance with the credit terms 2/30, n60: 85% in the month in which the inventory is purchased 15% in the following month (iv) The management of Pelican Merchandising has negotiated with a tenant to sublet office space to her beginning February 1. The rental is expected to be $552,000 per annum. The first month's rent along with one month's safety deposit is expected to be collected on February 1. Thereafter, monthly rental income becomes due at the beginning of each month. (v) Office Furniture & Fixtures, which is estimated to cost $350,000, will be purchased in February. The manager has made arrangement with the suppliers to make a cash deposit of 40% upon signing of the agreement in February. The balance will be settled in five (5) equal monthly instalments beginning March of 2022. (vi) The management of Pelican Merchandising is in the process of upgrading its fleet of motor vehicles. During February the business expects to sell an old delivery motor van that cost $540,000 at a loss of $34,000 to an employee. Accumulated depreciation on this motor van at that time is expected to be $246,000. The employee will be allowed to pay a deposit equal to 60% of the selling price in February; the balance will be settled in two equal amounts in March & April of 2022. (vii) Fixed operating expenses which accrue evenly throughout the year, are estimated to be $2,088,000 per annum, which include depreciation on non-current assets of $42,000 per month and are expected to be settled monthly. (viii) Other operating expenses which accrue evenly throughout the year are expected to be $696,000 per annum and will be settled monthly. Pelican Merchandising & More is a family-owned store. The business is now approaching the end of the year and is in the process of identifying its cash needs for the first quarter of the new year. You are the management accountant of the entity and have been tasked to prepare the cash budget for the business for the quarter ending March 31, 2022. (i) Extracts from the sales and purchases budgets are as follows: Month Cash Sales Sales On Account Cash Purchases On 2021 - 2022 Purchases Account $138,100 $156,500 $170,975 $135,740 $480,000 $600,000 $650,000 $700,000 $345,000 $380,000 $400,000 $480,000 November 2021 $25,800 $44,625 $30,400 December 2021 January 2022 February 2022 March 2022 $226,420 $800,000 $55,100 $540,000 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 4/30, n90: (ii) 55% in the month of sale 35% in the first month following the sale 8% in the second month following the sale The remaining 2% is expected to be uncollectible (iii) Accounts payable are settled as follows, in accordance with the credit terms 2/30, n60: 85% in the month in which the inventory is purchased 15% in the following month (iv) The management of Pelican Merchandising has negotiated with a tenant to sublet office space to her beginning February 1. The rental is expected to be $552,000 per annum. The first month's rent along with one month's safety deposit is expected to be collected on February 1. Thereafter, monthly rental income becomes due at the beginning of each month. (v) Office Furniture & Fixtures, which is estimated to cost $350,000, will be purchased in February. The manager has made arrangement with the suppliers to make a cash deposit of 40% upon signing of the agreement in February. The balance will be settled in five (5) equal monthly instalments beginning March of 2022. (vi) The management of Pelican Merchandising is in the process of upgrading its fleet of motor vehicles. During February the business expects to sell an old delivery motor van that cost $540,000 at a loss of $34,000 to an employee. Accumulated depreciation on this motor van at that time is expected to be $246,000. The employee will be allowed to pay a deposit equal to 60% of the selling price in February; the balance will be settled in two equal amounts in March & April of 2022. (vii) Fixed operating expenses which accrue evenly throughout the year, are estimated to be $2,088,000 per annum, which include depreciation on non-current assets of $42,000 per month and are expected to be settled monthly. (viii) Other operating expenses which accrue evenly throughout the year are expected to be $696,000 per annum and will be settled monthly.
Expert Answer:
1 A schedule of budgeted cash collections for trade receivables Jan Feb Mar November Sale 480000 8 3... View the full answer
Students also viewed these corporate finance questions
-
A 10-year bond is issued with a face value of $1,000, paying interest of $60 a year. If market yields increase shortly after the T-bond is issued, what happens to the bonds a. Coupon rate? b. Price?...
-
The company has bonds outstanding with a face value of $50,000 and an unamortized premium of $2,350 at the beginning of the year and $2,000 as of the end of the year. Sales (all for cash) were...
-
A 10-year maturity convertible bond with a face value of $1,000 and a 6% coupon on a company with a bond rating of Aaa is selling for $1,050. The bond pays interest annually. Each bond can be...
-
Consider the plane stress inhomogeneous case with only variation in elastic modulus given by E = E(y) = 1/ (Ay + B). Further assume that the Airy function depends only on y, = (y). Show that...
-
a. Data flow diagrams incorporate four symbols. Identify those symbols and suggest how each might be applied in the Netcom case. b. Netcom would need to maintain a database of customer records; that...
-
The Vernom Corporation produces and sells to wholesalers a highly successful line of summer lotion and insect repellents. Vernom has decided to diversify to stabilize sales throughout the year. A...
-
Consider the flat-plate heat transfer to be solved by the similarity approach. Show all the details leading to Eq. (18.15). What are the boundary conditions on \(\theta\) ? Extend your MATLAB code to...
-
Tolbert Company incurs these expenditures in purchasing a truck: cash price $24,000; accident insurance (during use) $2,000; sales taxes $1,080; motor vehicle license $300; and painting and lettering...
-
Bleakhouse Bakers produces breads and pastries. Bleakhouse is considering introducing a new breakfast item. They estimate materials costs at $4.00 per dozen and overhead costs of $2.02 per dozen....
-
1. What is the cost of debt for Sunrise Bakery? 2. What is their cost of equity? 3. What is the WACC? 4. Which cost of capital should be used to evaluate the feasibility of the oven purchase? 5....
-
Weaver Company Comparative Balance Sheet at December 31 Assets Cash and cash equivalents Accounts receivable Inventory Prepaid expenses Total current assets Property, plant, and equipment Less...
-
In 2003, Keith Jackson invested in a partnership known as Astonishing Discoveries, Ltd. He was a limited partner. Mr. Jackson paid \(\$ 25,000\) cash and, along with all other partners, signed a...
-
Explain the importance of the employment relationship to SHRM.
-
Define the term business model. How can entrepreneurial firms benefit by developing and using a business model? What are the downsides for entrepreneurial ventures when an effective business model...
-
Define reward management and strategic reward management;
-
Why is it important for an entrepreneur to build a strong ethical culture for his or her firm? What are some of the specific steps that can be taken in an entrepreneurial venture for the purpose of...
-
Prepare a comprehensive audit plan. Prepare a comprehensive audit plan . Clearly state the purpose of the report early. What has happened in the past and what do we want to happen in the future? Be...
-
The text defined intrinsic value as the value of an asset given a hypothetically complete understanding of the assets investment characteristics. Discuss why hypothetically is included in the...
-
Bethany, who weighs 560 N, lies in a hammock suspended by ropes tied to two trees. One rope makes an angle of 45 with the ground; the other makes an angle of 30. Find the tension in each of the ropes.
-
In the Skycoaster amusement park ride, riders are suspended from a tower by a long cable. A second cable then lifts them until they reach the starting position indicated in Figure P5.3. The lifting...
-
A dump truck, whose bed is made of steel, holds an old steel watering trough. The bed of the truck is slowly raised until the trough begins to slide. What is the acceleration of the trough as it...
Study smarter with the SolutionInn App