Please answer b and c, show all working/computations and label clearly

question a solutions

The management accountant at Miller Merchandising & More, Odail Russell is in the process of preparing the cash budget for the business for the fourth quarter of 2021. It is customary for the business to borrow money during this quarter. Extracts from the sales and purchases budgets are as follows: Cash Sales Sales On Account Month Purchases i) ii) August $85,000 $640,000 $420,000 September $70,000 $550,000 $550,000 October $88,550 $600,000 $500,000 November $77,160 $800,000 $600,000 December $174,870 $500,000 $450,000 An analysis of the records shows that trade receivables are settled according to the following credit pattern, in accordance with the credit terms 4/30, n90: 50% in the month of sale 30% in the first month following the sale 20% in the second month following the sale Expected purchases include monthly cash purchases of 5%. All other purchases are on account. Accounts payable are settled as follows, in accordance with the credit terms - 2/30, n60: 60% in the month in which the inventory is purchased 40% in the following month Fixed operating expenses which accrue evenly throughout the year, are estimated to be $1,680,000 per annum, (including depreciation on non-current assets of $420,000 per annum) and is settled monthly. Wages and salaries are expected to be $2,280,000 per annum and will be paid monthly. Other operating expenses are expected to be $108,000 per quarter and will be settled monthly. iii) iv) v) vi) 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 vii) viii) 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. Continued.......... Continued.. 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. (5 marks) A schedule of expected cash disbursements for accounts payable (purchases on account) for each of the months October to December. (4 marks) . 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. (25/2 marks) (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? (2 marks) (c) 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. (342 marks) Anwene (a) Budgeted ) Out tollection Budgeted leth Jolletion for Younde Receivables, Oct $6,00,000 - 3,00,000 -4.8.8% sept $5,50,000 2011 August $6,40,000 $ 5,81,000 501 of g discount = 2,88,000 2265,000 = 2,28,000 301 *8 Now tellection sol of 30-1 Oct 21000 sept o New 4, 95,000 5,70,000 4,27,300 23,500 Now $ 800,000 -4% of discount $3,8 4,000 Oct $ 6,00,000 $ 1,87, DOD 204.84 sept's 9,50,000 $2,10,ooo $ 6, 74,000 Dee Collection 50%. -240,000 Daca $ 5,00,000-4). Of Discourt of Now $ 8,00,000 249000 30-1 120,000 20-12 $6,00,00 $ 6, Boooo expected lash Drebarsement of Accounts payable Morth lash Salee luedit sales a purchases on furent). August 3,99,000 27,500 5, 22,00 , 30,000 sec Ou Payments 260) 4 4,45000,- 2:1. Discount = 273300 2,09000 lach Budget of Miller Merchandising & Mice fou guler ending Decks $ 4,88,300 Oct. restimated opening lash Bal Now Dec Add: - lash Inhous (455,000) (20,000) (2,33,000) lollection from Luade Recetuable 88550 77,260474,870 tale of Motor Vehicle 15, 81,000 6, 74,000 Rental triome & Deposit "Proceeds from Snuestment 3,00,000 Interest on Inwestment 3,tso less: lash outflowe 8,18,300 913,160 11938 lash purchase Payment to supplies 25,000 30,000 fixed operating expense 4,88,300 15, 25, 260 1,05,000 105,000 other openate expenses Acquisition of computer equipment Taxation 40, estimated closing lath (undraft) 8,44,300 1646769 12,000 1433,000) 133 4 % of sept $5,22,500 particulars lash Jake 84,000 1,04,000 600,000 28,00 52,000 uage 4 Salaus 22,500 4,793 490,000 190,000 1,05. 36,000 36000 4901 26000 360