Chapters 20-21 Homework

1. TMM.20-1
2. TMM.20-2
3. TMM.20-3
4. TMM.20-4
5. TMM.20-5
6. TMM.20-6
7. EX.20-08
8. EX.20-19
9. PR.20-02A.BLANKSHEET
10. PR.20-06B
11. TMM.21-1
12. TMM.21-2
13. TMM.21-3
14. TMM.21-4
15. TMM.21-5
16. EX.21-01
17. EX.21-02
18. EX.21-09
19. EX.21-14
20. PR.21-04A

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20. eBook
    • Learning Objective 5
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    A budget of estimated cash receipts and payments.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 An accounting device used to plan and control resources of operational departments and divisions.budget information:

    	September		October		November
    Sales	$250,000		$300,000		$315,000
    Manufacturing costs	150,000		180,000		185,000
    Selling and administrative expenses	42,000		48,000		51,000
    Capital expenditures	_		_		200,000

    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 $50,000 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 $40,000, marketable securities of $75,000, and accounts receivable of $300,000 ($60,000 from July sales and $240,000 from August sales). Sales on account for July and August were $200,000 and $240,000, respectively. Current liabilities as of September 1 include $40,000 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 $55,000 will be made in October. Bridgeports regular quarterly dividend of $25,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $50,000.

    Required:

    1. Prepare a monthly cash budget and supporting schedules for September, October, and November. Enter all amounts as positive values except for overall cash decrease and deficiency which should be indicated with a minus sign.

    Bridgeport Housewares Inc.
    Cash Budget
    For the Three Months Ending November 30
    	September	October	November
    Estimated cash receipts from:
    Cash sales Capital expenditures Cash increase or (decrease) Cash sales Dividends Income tax Less cash balance at beginning of month Less minimum cash balance Manufacturing costs Plus cash balance at beginning of month Plus minimum cash balance	$	$	$
    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 of month Plus minimum cash balance
    Total cash receipts	$	$	$
    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 of month Plus minimum cash balance	$	$	$
    Capital expenditures Cash increase or (decrease) Collection of accounts receivable Dividends Income tax Less cash balance at beginning of month Less minimum cash balance Plus cash balance at beginning of month Plus minimum cash balance Selling and administrative expenses
    Capital expenditures Cash increase or (decrease) Collection of accounts receivable Dividends Income tax Less cash balance at beginning of month Less minimum cash balance Plus cash balance at beginning of month Plus minimum cash balance Selling and administrative expenses
    Other purposes:
    Capital expenditures Cash increase or (decrease) Collection of accounts receivable Dividends Income tax Less cash balance at beginning of month Less minimum cash balance Plus cash balance at beginning of month Plus minimum cash balance Selling and administrative expenses
    Capital expenditures Cash increase or (decrease) Collection of accounts receivable Dividends Income tax Less cash balance at beginning of month Less minimum cash balance Plus cash balance at beginning of month Plus minimum cash balance Selling and administrative expenses
    Total cash payments	$	$	$
    Capital expenditures Cash increase or (decrease) Collection of accounts receivable Dividends Income tax Less cash balance at beginning of month Less minimum cash balance Plus cash balance at beginning of month Plus minimum cash balance Selling and administrative expenses	$	$	$
    Capital expenditures Cash increase or (decrease) Collection of accounts receivable Dividends Income tax Less cash balance at beginning of month Less minimum cash balance Plus cash balance at beginning of month Plus minimum cash balance Selling and administrative expenses
    Cash balance at end of month	$	$	$
    Less cash balance at beginning of month Capital expenditures Cash increase or (decrease) Collection of accounts receivable Dividends Income tax Less cash balance at beginning of month Less minimum cash balance Plus cash balance at beginning of month Plus minimum cash balance Selling and administrative expenses
    Excess or (deficiency)	$	$	$

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    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

    • will
    • will not
    be maintained in November. This situation can be corrected by
    • investing
    • borrowing
    and/or by the
    • purchase
    • sale
    of the marketable securities, if they are held for such purposes. At the end of September and October, the cash balance will
    • exceed
    • be short of
    the minimum desired balance.

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