SALLAT Household Furnishings & Appliances is a family-owned business. 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: i) Extracts from the sales and purchases budgets are as follows: Cash Sales Sales On Account Cash Purchases Purchases On Account Month May June $75,000 $135,000 $86,800 $105,600 $112,500 $480,000 $600,000 $390,000 $360,000 $450,000 $400,000 $500,000 $36,000 July August September $720,000 $640,000 $800,000 $61,700 $68,800 $77,250 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: ii) 50% in the month of sale 35% in the first month following the sale 15% in the second month following the sale ii) 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 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. iv) 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. v) 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) The management Sallat Household 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.
SALLAT Household Furnishings & Appliances is a family-owned business. 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: i) Extracts from the sales and purchases budgets are as follows: Cash Sales Sales On Account Cash Purchases Purchases On Account Month May June $75,000 $135,000 $86,800 $105,600 $112,500 $480,000 $600,000 $390,000 $360,000 $450,000 $400,000 $500,000 $36,000 July August September $720,000 $640,000 $800,000 $61,700 $68,800 $77,250 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: ii) 50% in the month of sale 35% in the first month following the sale 15% in the second month following the sale ii) 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 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. iv) 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. v) 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) The management Sallat Household 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The business needs to have a sense of its future cash flows and therefore requires the preparation of the following:
a. A schedule of expected cash disbursements for accounts payable (purchases on account) for each of the months July to September.
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