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:

Line Item Description September October November

Sales $$121,000$ $$149,000$ $$195,000$

Manufacturing costs $51,00064,00070,000$

Selling and administrative expenses $42,00045,00074,000$

Capital expenditures $47,000$

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 $$10,000$ 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 $$46,000,$ marketable securities of $$65,000,$ and accounts receivable of $$135,100($$$29,100$ from July sales and $$106,000$ from August sales$).$ Sales on account for July and August were $$97,000$ and $$106,000,$ respectively. Current liabilities as of September $1$ include $$10,000$ 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 $$18,000$ will be made in October. Bridgeport$$s regular quarterly dividend of $$10,000$ is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $$45,000.$

Required:

Question Content Area

$1.$ 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 $30$

Line Item Description September October November

Estimated cash receipts from:

$$-$ Select $-$

$$-$ Select $-$

$$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

Total cash receipts $Total cash receipts

$Total cash receipts

$Total cash receipts

Less estimated cash payments for:

$$-$ Select $-$

$$-$ Select $-$

$$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

Other purposes:

$-$ Select $-$

$-$ Select $-$

Total cash payments $Total cash payments

$Total cash payments

$Total cash payments

$$-$ Select $-$

$$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

Cash balance at end of month $Cash balance at end of month

$Cash balance at end of month

$Cash balance at end of month

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

Excess or $($deficiency$)$ $Excess or $($deficiency$)$

$Excess or $($deficiency$)$

$Excess or $($deficiency$)$

Question Content Area

$2.$ 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 fill in the blank $1$ of $4$

be maintained in November. This situation can be corrected by fill in the blank $2$ of $4$

and$/$or by the fill in the blank $3$ of $4$

of the marketable securities$,$ if they are held for such purposes. At the end of September and October, the cash balance will fill in the blank $4$ of $4$

the minimum desired balance.