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	$122,000		$157,000		$206,000
Manufacturing costs	51,000		68,000		74,000
Selling and administrative expenses	35,000		42,000		45,000
Capital expenditures	_		_		49,000

The company expects to sell about 12% 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 $8,000 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, 75% 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 $46,000, marketable securities of $66,000, and accounts receivable of $141,300 ($107,000 from April sales and $34,300 from March sales). Sales on account for March and April were $98,000 and $107,000, respectively. Current liabilities as of May 1 include $11,000 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 $19,000 will be made in June. Sonomas regular quarterly dividend of $8,000 is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $36,000.

Required:

1. Prepare a monthly cash budget and supporting schedules for May, June, and July. Input all amounts as positive values except overall cash decrease and deficiency which should be indicated with a minus sign.

Sonoma Housewares Inc.
Cash Budget
For the Three Months Ending July 31
	May	June	July
Estimated cash receipts from:
Cash sales	$fill in the blank	$fill in the blank	$fill in the blank
Collection of accounts receivable	fill in the blank	fill in the blank	fill in the blank
Total cash receipts	$fill in the blank	$fill in the blank	$fill in the blank
Estimated cash payments for:
Manufacturing costs	$fill in the blank	$fill in the blank	$fill in the blank
Selling and administrative expenses	fill in the blank	fill in the blank	fill in the blank
Capital expenditures			fill in the blank
Other purposes:
Income tax		fill in the blank
Dividends			fill in the blank
Total cash payments	$fill in the blank	$fill in the blank	$fill in the blank
Cash increase or (decrease)	$fill in the blank	$fill in the blank	$fill in the blank
Cash balance at beginning of month	fill in the blank	fill in the blank	fill in the blank
Cash balance at end of month	$fill in the blank	$fill in the blank	$fill in the blank
Minimum cash balance	fill in the blank	fill in the blank	fill in the blank
Excess (deficiency)	$fill in the blank	$fill in the blank	$fill in the blank

2. The budget indicates that the minimum cash balance ___ be maintained in July. 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 May and June, the cash balance will ____ the minimum desired balance.