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   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		$127,000		$172,000
   Manufacturing costs	45,000		55,000		62,000
   Selling and administrative expenses	31,000		34,000		38,000
   Capital expenditures	_		_		41,000

   The company expects to sell about 12% of its merchandise for cash. Of sales on account, 60% 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, 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 $40,000, marketable securities of $57,000, and accounts receivable of $127,000 ($93,000 from April sales and $34,000 from March sales). Sales on account for March and April were $85,000 and $93,000, respectively. Current liabilities as of May 1 include $10,000 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 $15,000 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.

   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 cc609008d06ffbf_1	$fill in the blank cc609008d06ffbf_2	$fill in the blank cc609008d06ffbf_3
   Collection of accounts receivable	fill in the blank cc609008d06ffbf_4	fill in the blank cc609008d06ffbf_5	fill in the blank cc609008d06ffbf_6
   Total cash receipts	$fill in the blank cc609008d06ffbf_7	$fill in the blank cc609008d06ffbf_8	$fill in the blank cc609008d06ffbf_9
   Estimated cash payments for:
   Manufacturing costs	$fill in the blank cc609008d06ffbf_10	$fill in the blank cc609008d06ffbf_11	$fill in the blank cc609008d06ffbf_12
   Selling and administrative expenses	fill in the blank cc609008d06ffbf_13	fill in the blank cc609008d06ffbf_14	fill in the blank cc609008d06ffbf_15
   Capital expenditures			fill in the blank cc609008d06ffbf_16
   Other purposes:
   Income tax		fill in the blank cc609008d06ffbf_17
   Dividends			fill in the blank cc609008d06ffbf_18
   Total cash payments	$fill in the blank cc609008d06ffbf_19	$fill in the blank cc609008d06ffbf_20	$fill in the blank cc609008d06ffbf_21
   Cash increase or (decrease)	$fill in the blank cc609008d06ffbf_22	$fill in the blank cc609008d06ffbf_23	$fill in the blank cc609008d06ffbf_24
   Cash balance at beginning of month	fill in the blank cc609008d06ffbf_25	fill in the blank cc609008d06ffbf_26	fill in the blank cc609008d06ffbf_27
   Cash balance at end of month	$fill in the blank cc609008d06ffbf_28	$fill in the blank cc609008d06ffbf_29	$fill in the blank cc609008d06ffbf_30
   Minimum cash balance	fill in the blank cc609008d06ffbf_31	fill in the blank cc609008d06ffbf_32	fill in the blank cc609008d06ffbf_33
   Excess (deficiency)	$fill in the blank cc609008d06ffbf_34	$fill in the blank cc609008d06ffbf_35	$fill in the blank cc609008d06ffbf_36

   2. The budget indicates that the minimum cash balance

   willwill notwill not

   be maintained in July. This situation can be corrected by

   investingborrowingborrowing

   and/or by the

   purchasesalesale

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

   exceedbe short ofexceed

   the minimum desired balance.

   Feedback

   Sometimes an item July be a decrease in one period and an increase in a different period.

   What weaknesses are shown by this cash budget?