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 $$137,000$ $$167,000$ $$218,000$

Manufacturing costs $58,00072,00078,000$

Selling and administrative expenses $48,00050,00083,000$

Capital expenditures $\_\_52,000$

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 $$52,000,$ marketable securities of $$74,000,$ and accounts receivable of $$153,000($$$33,000$ from July sales and $$120,000$ from August sales$).$ Sales on account for July and August were $$110,000$ and $$120,000,$ respectively. Current liabilities as of September $1$ include $$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 $$7,000$ is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $$51,000.$

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 $30$

September October November

Estimated cash receipts from:

Cash sales

$Cash sales

$13,700$

$Cash sales

$16,700$

$Cash sales

$21,800$

Collection of accounts receivable

Collection of accounts receivable

$117,000$

Collection of accounts receivable

$122,310$

Collection of accounts receivable

$142,200$

Total cash receipts $fill in the blank cbda$6$dfe$0$f$98$fdd$\_9$

$130,700$

$fill in the blank cbda$6$dfe$0$f$98$fdd$\_10$

$139,010$

$fill in the blank cbda$6$dfe$0$f$98$fdd$\_11$

$164,000$

Less estimated cash payments for:

Manufacturing costs

$Manufacturing costs

$47,800$

$Manufacturing costs

$62,200$

$Manufacturing costs

$69,800$

Selling and administrative expenses

Selling and administrative expenses

$48,000$

Selling and administrative expenses

$50,000$

Selling and administrative expenses

$83,000$

Capital expenditures

Capital expenditures

$52,000$

Other purposes:

Income tax

Income tax

$20,000$

Dividends

Dividends

$7,000$

Total cash payments $fill in the blank cbda$6$dfe$0$f$98$fdd$\_26$

$95,800$

$fill in the blank cbda$6$dfe$0$f$98$fdd$\_27$

$132,200$

$fill in the blank cbda$6$dfe$0$f$98$fdd$\_28$

$211,800$

Cash increase or $($decrease$)$

$Cash increase or $($decrease$)$

$34,900$

$Cash increase or $($decrease$)$

$6,810$

Cash increase or $($decrease$)$

$-47,800$

Plus cash balance at beginning of month

Plus cash balance at beginning of month

$52,000$

Plus cash balance at beginning of month

Plus cash balance at beginning of month

Cash balance at end of month $fill in the blank cbda$6$dfe$0$f$98$fdd$\_37$

$fill in the blank cbda$6$dfe$0$f$98$fdd$\_38$

$fill in the blank cbda$6$dfe$0$f$98$fdd$\_39$

Less minimum cash balance

Less minimum cash balance

Less minimum cash balance

Less minimum cash balance

Excess or $($deficiency$)$ $fill in the blank cbda$6$dfe$0$f$98$fdd$\_44$

$fill in the blank cbda$6$dfe$0$f$98$fdd$\_45$

$fill in the blank cbda$6$dfe$0$f$98$fdd$\_46$

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

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.