Cash budget

The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented

with the following budget information:

The company expects to sell about $10\%$ of its merchandise for cash. Of sales on account, $70\%$ are expected to be collected in the month

following the sale and the remainder the following month $($second month following sale$).$ Depreciation, insurance, and property tax expense

represent $$7,000$ of the estimated monthly manufacturing costs. The annual insurance premium is paid in January, and the annual property

taxes are paid in December. Of the remainder of the manufacturing costs, $80\%$ are expected to be paid in the month in which they are

incurred and the balance in the following month.

Current assets as of September $1$ include cash of $$51,000,$ marketable securities of $$72,000,$ and accounts receivable of $$147,800($ $$31,800$

from July sales and $$116,000$ from August sales$).$ Sales on account for July and August were $$106,000$ and $$116,000,$ respectively. Current

liabilities as of September $1$ include $$7,000$ of accounts payable incurred in August for manufacturing costs. All selling and administrative

expenses are paid in cash in the period they are incurred. An estimated income tax payment of $$20,000$ will be made in October. Bridgeport's

regular quarterly dividend of $$7,000$ is expected to be declared in October and paid in November. Management desires to maintain a

minimum cash balance of $$50,000.$

Required:

Prepare a monthly cash budget and supporting schedules for September, October, and November. Assume $360$ days per year for interest

calculations.

Bridgeport Housewares Inc.

Cash Budget

For the Three Months Ending November $30$

On the basis of the cash budget prepared in part $(1),$ what recommendation should be made to the controller?

The budget indicates that the minimum cash balance

be maintained in November. This situation can be corrected by

i and$/$or by the

September and October, the cash balance will

of the marketable securities$,$ if they are held for such purposes. At the end of

the minimum desired balance.