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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	$124,000		$150,000		$210,000
Manufacturing costs	52,000		65,000		76,000
Selling and administrative expenses	36,000		41,000		46,000
Capital expenditures	_		_		111,000

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, 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 $47,000, marketable securities of $67,000, and accounts receivable of $143,650 ($109,000 from April sales and $34,650 from March sales). Sales on account for March and April were $99,000 and $109,000, respectively. Current liabilities as of May 1 include $10,500 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 $18,000 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 $37,000.

Required:

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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 8b78e8009ff3fea_1	$fill in the blank 8b78e8009ff3fea_2	$fill in the blank 8b78e8009ff3fea_3
Collection of accounts receivable	fill in the blank 8b78e8009ff3fea_4	fill in the blank 8b78e8009ff3fea_5	fill in the blank 8b78e8009ff3fea_6
Total cash receipts	$fill in the blank 8b78e8009ff3fea_7	$fill in the blank 8b78e8009ff3fea_8	$fill in the blank 8b78e8009ff3fea_9
Estimated cash payments for:
Manufacturing costs	$fill in the blank 8b78e8009ff3fea_10	$fill in the blank 8b78e8009ff3fea_11	$fill in the blank 8b78e8009ff3fea_12
Selling and administrative expenses	fill in the blank 8b78e8009ff3fea_13	fill in the blank 8b78e8009ff3fea_14	fill in the blank 8b78e8009ff3fea_15
Capital expenditures			fill in the blank 8b78e8009ff3fea_16
Other purposes:
Income tax		fill in the blank 8b78e8009ff3fea_17
Dividends			fill in the blank 8b78e8009ff3fea_18
Total cash payments	$fill in the blank 8b78e8009ff3fea_19	$fill in the blank 8b78e8009ff3fea_20	$fill in the blank 8b78e8009ff3fea_21
Cash increase or (decrease)	$fill in the blank 8b78e8009ff3fea_22	$fill in the blank 8b78e8009ff3fea_23	$fill in the blank 8b78e8009ff3fea_24
Cash balance at beginning of month	fill in the blank 8b78e8009ff3fea_25	fill in the blank 8b78e8009ff3fea_26	fill in the blank 8b78e8009ff3fea_27
Cash balance at end of month	$fill in the blank 8b78e8009ff3fea_28	$fill in the blank 8b78e8009ff3fea_29	$fill in the blank 8b78e8009ff3fea_30
Minimum cash balance	fill in the blank 8b78e8009ff3fea_31	fill in the blank 8b78e8009ff3fea_32	fill in the blank 8b78e8009ff3fea_33
Excess (deficiency)	$fill in the blank 8b78e8009ff3fea_34	$fill in the blank 8b78e8009ff3fea_35	$fill in the blank 8b78e8009ff3fea_36

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2. The budget indicates that the minimum cash balance:

will/will not

be maintained in July. This situation can be corrected by:

investing/borrowing

and by the: purchase/sale

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

exceed/be short of

the minimum desired balance.