The assignment seeks to examine the following selected course objectives:

Course Objectives:

1) Use the stated collection policy of an entity to determine the expected monthly collections for trade receivables

2) Given the collection policy of suppliers, compute the expected cash disbursements for accounts payable

3) Given an expected set of expected business events for an entity, develop a monthly cash budget (with a total column) for the entity, clearly showing the cash receipts and cash payments and the minimum cash balance before financing.

4) Use the collection/payment policy to determine the balances to be reflected in the balance sheet as expected trade receivables and payables at a given date.

5) State and explain internal measures that can be implemented by a business entity to increase its monthly cash balance

The business needs to have a sense of its future cash inflows and outflows for the quarter and therefore requires the preparation of the following:

Question: Upon receipt of the budget, the team manager, Damion Brownie, has now informed you that, in keeping with industry players, the management of Varsity Supplies & Things have indicated an industry requirement to maintain a minimum cash balance of $162,000 each month. He has also noted that management is very keen on keeping the gearing ratio of the business as low as possible and would therefore prefer to cushion any gaps internally using equity financing. Based on the budget prepared, will the business be achieving this desired target?

Suggest three (3) internal strategies that may be employed by management to improve the organizations monthly cash flow and militate against or reduce any possible shortfall reflected in the budget prepared. Each strategy must be fully explained

Varsity Supplies \& Things is a family-owned store. The business is now approaching the end of the year and is desirous of identifying its expected cash inflows and outflows 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, 2023. The following data is available: (i) Extracts from the sales and purchases budgets are as follows: (ii) 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 : 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 Varsity Supplies \& Things has negotiated with a tenant to sublet office space to her beginning February 1. The rental is expected to be $576,000 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 2023. (vi) The management of Varsity Supplies \& Things 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 $720,000 at a loss of $45,000 to an employee. Accumulated depreciation on this motor van at that time is expected to be $375,000. The employee will be allowed to pay a deposit equal to 50% of the selling price in February; the balance will be settled in two equal amounts in March \& April of 2023. (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 $504,000 per annum and are expected to be settled monthly. (viii) Other operating expenses which accrue evenly throughout the year are expected to be $672,000 per annum and will be settled monthly. Continued. (ix) A long-term bond purchased by Varsity Supplies \& Things two (2) years ago, with a face value of $450,000 will mature on January 15,2023 . 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 8131% per annum is also expected to be collected (x) As part of its investing activities, the management of Varsity Supplies \& Things has just concluded an expansion project relating to the business's storage facilities. The project required capital outlay of $1,600,000 and was funded by a loan from a family member, who is a silent partner in the business. $320,000 of the principal along with interest of $35,000 will become due and payable on January 25, 2023. (xi) Wages and salaries are expected to be $3,384,000 per annum and will be paid monthly. (xii) The cash balance on March 31,2023 , is expected to be an overdraft of $248,000 Varsity Supplies \& Things is a family-owned store. The business is now approaching the end of the year and is desirous of identifying its expected cash inflows and outflows 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, 2023. The following data is available: (i) Extracts from the sales and purchases budgets are as follows: (ii) 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 : 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 Varsity Supplies \& Things has negotiated with a tenant to sublet office space to her beginning February 1. The rental is expected to be $576,000 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 2023. (vi) The management of Varsity Supplies \& Things 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 $720,000 at a loss of $45,000 to an employee. Accumulated depreciation on this motor van at that time is expected to be $375,000. The employee will be allowed to pay a deposit equal to 50% of the selling price in February; the balance will be settled in two equal amounts in March \& April of 2023. (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 $504,000 per annum and are expected to be settled monthly. (viii) Other operating expenses which accrue evenly throughout the year are expected to be $672,000 per annum and will be settled monthly. Continued. (ix) A long-term bond purchased by Varsity Supplies \& Things two (2) years ago, with a face value of $450,000 will mature on January 15,2023 . 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 8131% per annum is also expected to be collected (x) As part of its investing activities, the management of Varsity Supplies \& Things has just concluded an expansion project relating to the business's storage facilities. The project required capital outlay of $1,600,000 and was funded by a loan from a family member, who is a silent partner in the business. $320,000 of the principal along with interest of $35,000 will become due and payable on January 25, 2023. (xi) Wages and salaries are expected to be $3,384,000 per annum and will be paid monthly. (xii) The cash balance on March 31,2023 , is expected to be an overdraft of $248,000