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 $$109,000$ $$141,000$ $$181,000$

Manufacturing costs $46,00061,00065,000$

Selling and administrative expenses $32,00038,00040,000$

Capital expenditures $\_\_96,000$

The company expects to sell about $15\%$ 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 $$7,000$ 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, $80\%$ are expected to be paid in the month in which they are incurred and the balance in the following month.

Current assets as of May $1$ include cash of $$41,000,$ marketable securities of $$59,000,$ and accounts receivable of $$125,450($$$95,000$ from April sales and $$30,450$ from March sales$).$ Sales on account for March and April were $$87,000$ and $$95,000,$ respectively. Current liabilities as of May $1$ include $$15,000$ 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 $$17,000$ will be made in June. Sonoma$$s regular quarterly dividend of $$7,000$ is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $$32,000.$

Required:

Question Content Area

$1.$ 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 $756$f$28020$fadfb$5\_1$

$16,350$

$fill in the blank $756$f$28020$fadfb$5\_2$

$21,150$

$fill in the blank $756$f$28020$fadfb$5\_3$

$27,150$

Collection of accounts receivable fill in the blank $756$f$28020$fadfb$5\_4$

$83,308$

fill in the blank $756$f$28020$fadfb$5\_5$

$93,560$

fill in the blank $756$f$28020$fadfb$5\_6$

$98,250$

Total cash receipts $fill in the blank $756$f$28020$fadfb$5\_7$

$113,623$

$fill in the blank $756$f$28020$fadfb$5\_8$

$131,885$

$fill in the blank $756$f$28020$fadfb$5\_9$

$147,885$

Estimated cash payments for:

Manufacturing costs $fill in the blank $756$f$28020$fadfb$5\_10$

$37,232$

$fill in the blank $756$f$28020$fadfb$5\_11$

$52,660$

$fill in the blank $756$f$28020$fadfb$5\_12$

$57,360$

Selling and administrative expenses fill in the blank $756$f$28020$fadfb$5\_13$

$33,736$

fill in the blank $756$f$28020$fadfb$5\_14$

$36,736$

fill in the blank $756$f$28020$fadfb$5\_15$

$38,736$

Capital expenditures fill in the blank $756$f$28020$fadfb$5\_16$

$96,000$

Other purposes:

Income tax fill in the blank $756$f$28020$fadfb$5\_17$

$17,000$

Dividends fill in the blank $756$f$28020$fadfb$5\_18$

$7,000$

Total cash payments $fill in the blank $756$f$28020$fadfb$5\_19$

$71,968$

$fill in the blank $756$f$28020$fadfb$5\_20$

$106,396$

$fill in the blank $756$f$28020$fadfb$5\_21$

$198,096$

Cash increase or $($decrease$)$ $fill in the blank $756$f$28020$fadfb$5\_22$

$41,655$

$fill in the blank $756$f$28020$fadfb$5\_23$

$25,489$

$fill in the blank $756$f$28020$fadfb$5\_24$

$-50,211$

Cash balance at beginning of month fill in the blank $756$f$28020$fadfb$5\_25$

$82,655$

fill in the blank $756$f$28020$fadfb$5\_26$

$108,144$

fill in the blank $756$f$28020$fadfb$5\_27$

$57,933$

Cash balance at end of month $fill in the blank $756$f$28020$fadfb$5\_28$

$82,655$

$fill in the blank $756$f$28020$fadfb$5\_29$

$108,144$

$fill in the blank $756$f$28020$fadfb$5\_30$

$57,933$

Minimum cash balance fill in the blank $756$f$28020$fadfb$5\_31$

$32,000$

fill in the blank $756$f$28020$fadfb$5\_32$

$32,000$

fill in the blank $756$f$28020$fadfb$5\_33$

$32,000$

Excess $($deficiency$)$ $fill in the blank $756$f$28020$fadfb$5\_34$

$50,655$

$fill in the blank $756$f$28020$fadfb$5\_35$

$76,144$

$fill in the blank $756$f$28020$fadfb$5\_36$

$25,933$

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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 of collections from sales is prepared.

Question Content Area

$2.$ The budget indicates that the minimum cash balance

will not

be maintained in July. This situation can be corrected by

borrowing

and$/$or by the

sale

of the marketable securities$,$ if they are held for such purposes. At the end of May and June, the cash balance will

exceed

the minimum desired balance.