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 budget information:

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 $$10,000$ 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 $$35,000,$ marketable securities of $$49,000,$ and accounts receivable of $$101,900$

$($ $$21,900$ from July sales and $$80,000$ from August sales$).$ Sales on account for July and August were $$73,000$ and $$80,000,$

respectively. Current liabilities as of September $1$ include $$10,000$ 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

$$14,000$ will be made in October. Bridgeport's regular quarterly dividend of $$10,000$ is expected to be declared in October and paid

in November. Management desires to maintain a minimum cash balance of $$34,000.$

Required:

Prepare a monthly cash budget and supporting schedules for September, October, and November. Assume $360$ days per year for

interest calculations.

Bridgeport Housewares Inc.

Cash Budget

For the Three Months Ending November $30$

Other purposes:

Cash balance at end of month

Excess or $($deficiency$)$

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

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

the minimum desired balance.