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	$123,000		$155,000		$196,000
Manufacturing costs	52,000		67,000		71,000
Selling and administrative expenses	43,000		47,000		74,000
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 $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 $47,000, marketable securities of $66,000, and accounts receivable of $137,400 ($29,400 from July sales and $108,000 from August sales). Sales on account for July and August were $98,000 and $108,000, 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 $19,000 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 $46,000.

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.

Cash Budget The controller 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 $123,000 $155,000 $196,000 Manufacturing costs 52,000 67,000 71,000 Selling and administrative expenses 43,000 47,000 74,000 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 $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 or September 1 include cash of 547,000, marketable securities of $66,000, and accounts receivable of $137,400 ($29,400 from July sales and 5103,000 from August sales). Sales on account for July and August were $98,000 and $108,000, 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 $19,000 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 $46,000. 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 November For the Three Months Ending November 30 September October Estimated cash receipts from: Cash sales s 12,300 s 15,500 $ 19,600 Collection of accounts receivable 86,400 x 71,070 x 90,000 X Total cash receipts S 98,700 x s 86,670 X 109,600 X Less estimated cash payments for: s Other purposes: di QILDI Total cash payments Cash balance at end of month s Excess or (deficiency) Feedback Cik My Wuk The primary source of estimated cash recepts is from cash sales and collections on account. To estimate cash receipts from cash sales and collections on account, a schedule of collections from sales is prepared. 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 securities, if they are held for such purposes. At the end of September and October, the cash balance will the minimum desired balance. and/or by the of the marketable Feedback Check My Wuk Sometimes an iterr may be a decrease in one period and an increase in a different period, What weaknesses are shown by this cash budget? Fw: Check it walk Partially correct 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: Cash sales $ 12,300 15,500 19.600 Collection of accounts receivable B6,400 x 71,070 x 90,000 x Total cash receipts $ 98,700X 86,570 X #109,600 x Less estimated cash payments for: Capital expenditures Cash increase or (decrease) Collection of accounts receivable Dividends Income tax Less cash balance at beginning of month Less minimum cash balance Manufacturing costs Plus cash balance at beginning month Plus minimum cash balance wanan para III OUT Cash balance at end of month Feedback Car My Wank The primary source of estimated cash receipts is from cash sales and collections on account. estimate cash receipts from cash sales and collections on account, a schedule of collections from sales is prepared. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller? and/or by the of the marketable le budget indicates that the minimum cash balance curities, if they are held for such purposes. At the will will not be maintained in November. This situation can be corrected by October, the cash balance will the minimum desired balance. Feedback Check My Work Sometimes an item may be a decrease in one period and an increase in a different period. What weaknesses are shown by this cash budget? Fcccback Check My Work Partially correct HOMEWORK #2 eBook Show Me Ik FHwa Crack My Work The primary source of estimated cash receipts is from cash sales and collections on account. To estimate cash receipts from cash sales and collections on account, a schedule or collections from sales prepared 2. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller? and/or by the of the marketable The budget indicates that the minimum cash belance be maintained in November. This situation can be corrected by securities, if they are held for such purposes. At the end of September and October, the cash balance will the minimum desired balance exceed be short of Fue. Sometimes an Item may be a decrease in one perlod and an increase in a different period. What weaknesses are shown by this cash budget? Fww. Partially correct Feedback Check Wars The primary source of estimated cash recelts is from cash sales and collections on account. To estimate cash receipts from cash sales and collections on account, a schedule of collections from sales is prepared. 2. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller? and/or by the of the marketable The budget indicates that the minimum cash balance be maintained in November. This situation can be corrected by ecurities, if they are held for such purposes. At the end of September and October, the cash balance will the minimum desired balance. purchase sale Feedback Check My Work Sometimes an Item may be a decrease in one period and an increase in a different period. What weaknesses are shown by this cash budget? FAACHACK Chark My Work Partially correct