Cash Budget

The controller of Sonoma Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:

	May		June		July
Sales	$106,000		$134,000		$170,000
Manufacturing costs	45,000		58,000		61,000
Selling and administrative expenses	31,000		36,000		37,000
Capital expenditures	_		_		41,000

The company expects to sell about 10% of its merchandise for cash. Of sales on account, 65% 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 $6,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in September, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 85% are expected to be paid in the month in which they are incurred and the balance in the following month.

Current assets as of May 1 include cash of $40,000, marketable securities of $57,000, and accounts receivable of $122,750 ($93,000 from April sales and $29,750 from March sales). Sales on account for March and April were $85,000 and $93,000, respectively. Current liabilities as of May 1 include $13,000 of accounts payable incurred in April for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of $16,000 will be made in June. Sonomas regular quarterly dividend of $6,000 is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $31,000.

The controle of Sonoma Howare Inc. Instruct you to prepare a mon cash budget for the next three months. You are presented with the following budget information $100,000 .00 $170.000 Manufacturing con Selling and administrative expenses 31,000 The company expect to all about 10 of merchandise for cash of sales on account, 65% 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 present 96,000 of the estimated monthly manufacturing costs. The ce premi e t hea r ty are paid in November of the remainder of the manufacturing costs, are expected to be paid in the month in which the incurred and the balance in the following month Current set as of May 1 Indude cachof $40,000, mart respective Current Bless of Parlindude 13.000 f $16,000 will be made in So r ter u res of $57.000 and accounts rec 1 122,700 .000 unt parte incurred in April for manufacturing costs. Als d end of $5,000 is expected to be dedared i n and add e 29.5 from March Sales Sales on account for Harch and April 15.000 and $99.000 p repaid in in the perioder med. An estimated income taxamento to main ch balance of 531,000. 1. Prepare a monthly cash budget and supporting schedules for May June, and cash dec a nd defidency which should be indicated with a mission m wares Escach puso Sing and more mount positive values cept overal cash decrease and decency which should be indicated with a minus sign 1. Prepare a monthly cash bulion and supporting schedules for May June, and My. Inout Sonoma Housewares Inc. Cash Budget m ed cash receipts from Collection of contract Estimated cash payment for Manufacturing Selling and administrative pense Income tax II II IIIII) 100 01 ODLO) Dividends Total cash Cash increase or decrease Cash Balance at beginning of month Cash balance at end of month Es (fi of the marketable securities, if they are held for such 2. The budget indicates that the minimum cash balance purposes. At the end of May and Pune, the cash balance will maintained in July. This situation can be corrected by the minimum desired balance