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:

	September		October		November
Sales	$122,000		$144,000		$205,000
Manufacturing costs	51,000		62,000		74,000
Selling and administrative expenses	43,000		43,000		78,000
Capital expenditures	_		_		49,000

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 $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 $46,000, marketable securities of $66,000, and accounts receivable of $136,400 ($29,400 from July sales and $107,000 from August sales). Sales on account for July and August were $98,000 and $107,000, 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 $17,000 will be made in October. Bridgeports 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 $45,000.

Required:

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
	September	October	November
Estimated cash receipts from:
	$fill in the blank cf731300e015fa4_2	$fill in the blank cf731300e015fa4_3	$fill in the blank cf731300e015fa4_4
	fill in the blank cf731300e015fa4_6	fill in the blank cf731300e015fa4_7	fill in the blank cf731300e015fa4_8
Total cash receipts	$fill in the blank cf731300e015fa4_9	$fill in the blank cf731300e015fa4_10	$fill in the blank cf731300e015fa4_11
Less estimated cash payments for:
	$fill in the blank cf731300e015fa4_13	$fill in the blank cf731300e015fa4_14	$fill in the blank cf731300e015fa4_15
	fill in the blank cf731300e015fa4_17	fill in the blank cf731300e015fa4_18	fill in the blank cf731300e015fa4_19
			fill in the blank cf731300e015fa4_21
Other purposes:
		fill in the blank cf731300e015fa4_23
			fill in the blank cf731300e015fa4_25
Total cash payments	$fill in the blank cf731300e015fa4_26	$fill in the blank cf731300e015fa4_27	$fill in the blank cf731300e015fa4_28
	$fill in the blank cf731300e015fa4_30	$fill in the blank cf731300e015fa4_31	fill in the blank cf731300e015fa4_32
	fill in the blank cf731300e015fa4_34	fill in the blank cf731300e015fa4_35	fill in the blank cf731300e015fa4_36
Cash balance at end of month	$fill in the blank cf731300e015fa4_37	$fill in the blank cf731300e015fa4_38	$fill in the blank cf731300e015fa4_39
	fill in the blank cf731300e015fa4_41	fill in the blank cf731300e015fa4_42	fill in the blank cf731300e015fa4_43
Excess or (deficiency)	$fill in the blank cf731300e015fa4_44	$fill in the blank cf731300e015fa4_45	$fill in the blank cf731300e015fa4_46

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 be maintained in November. This situation can be corrected by and/or by the of the marketable securities, if they are held for such purposes. At the end of September and October, the cash balance will the minimum desired balance.