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QUESTION 1(40 MARKS) The management accountant at Hawk Electronics Company, Robert Richie, is in the process of preparing the cash budget for the business for the quarter ending December 31, 2018. Extracts from the sales and purchases budgets are as follows: Month 2018 Cash Sales August September October November December $121,100 $165,500 $131,400 $167,350 $156,200 Sales On Account $480,000 $600,000 $700,000 $650,000 $800,000 Purchases On Account $390,000 $360,000 $480,000 $400,000 $500,000 (0) 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 2/30, n90 45% in the month of sale 30% in the first month following the sale 25% in the second month following the sale (6) Accounts payable are settled as follows, in accordance with the credit terms 4/30, n60: 75% in the month in which the inventory is purchased 25% in the following month (iv) The management of Hawk Electronics is in the process of upgrading its fleet of motor vehicles. During December the company expects to sell an old Toyota Corolla motor vehicle that cost $500,000 at a gain of $45,000. Accumulated depreciation on this motor vehicle at that time is expected to be $345,000. The employee will be allowed to pay a deposit equal to 65% of the selling price in December, the balance will be settled in two equal amounts in January & February of 2019. Computer Equipment, which is estimated to cost $300,000, will be purchased in November. The manager has made arrangements with the suppliers to make a cash deposit of 40% upon signing of the agreement in November. The balance will be settled in four (4) equal monthly instalments beginning December 2018. A long-term bond purchased by Hawk Electronics 4 years ago, with a face value of $500,000 will mature on October 20, 2018. 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 grote of 6% per annum is also expected to be collected (v) (vi) Fixed operating expenses which accrue evenly throughout the year, are estimated to be $2,016,000 per annum, [including depreciation on non-current assets of $42,000 per month) and are settled monthly (vii) Other operating expenses are expected to be $171,000 per quarter and are settled monthly. Question 1 Continued.. (vill) The management of Hawk Electronics has negotiated with a tenant to rent office space to her beginning November 1. The rental is $540,000 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. (ix) Wages and salaries are expected to be $2,904,000 per annum and will be paid monthly (x) As part of its investing activities, the management of Hawk Electronics has just concluded an expansion project relating to the business's administrative facilities. The project required capital outlay of $1,800,000 and was funded by external financing. $300,000 of the principal along with interest of $75,000 will become due and payable in October 2018 (xi) The cash balance on September 30, 2018 is expected to be an overdraft of $154,000 Required: Prepare a schedule of budgeted cash collections for sales on account for each of the months October to December, 2018. (5 marks) Prepare a schedule of expected cash disbursements for purchases for the quarter to December 31, 2018 (4 marks) Prepare a cash budget, with a total column, for the quarter ending December 31, 2018, showing the receipts and payments for each month. (25% marks) Companies in the industry in which Hawk Electronics operates are required to maintain a minimum cash balance of $155,000 each month. Based on the budget prepared, will the business be meeting this requirement? Suggest four (4) possible steps (other than borrowing), that may be taken by the management of the company to improve the organization's cash flow. (5% marks)

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