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 $116,000 $146,000 $186,000 Manufacturing costs 49,000 63,000 67,000 Selling and administrative expenses 34,000 39,000 41,000 Capital expenditures _ _ 45,000

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 $116,000 $146,000 $186,000 Manufacturing costs 49,000 63,000 67,000 Selling and administrative expenses 34,000 39,000 41,000 Capital expenditures 45,000 The company expects to sell about 15% 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 $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 $44,000, marketable securities $63,000, and accounts receivable of $139,200 ($102,000 from April sales and $37,200 from March sales). Sales on account for March and April were $93,000 and $102,000, respectively. Current liabilities as of May 1 include $13,000 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 $18,000 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 $34,000. 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 17,400 21,900 27,900 Collection of accounts receivable 98,850 X 100,790 x 114,623 X Total cash receipts $ 116,250 X $ 122,690 X 142,523 X Estimated cash payments for: Manufacturing costs 51,550 x 54,050 X $ 60,250 Selling and administrative expenses 34,000 39,000 41,000 Capital expenditures 45,000 Other purposes: 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 17,400 21,900 27,900 Collection of accounts receivable 98,850 x 100,790 X 114,623 x Total cash receipts $ 116,250 X $ 122,690 X 142,523 x 54,050 X 51,550 X $ 34,000 60,250 x 41,000 39,000 Estimated cash payments for: Manufacturing costs Selling and administrative expenses Capital expenditures Other purposes: Income tax 45,000 17,000 X Dividends 6,000 X Total cash payments 85,550 110,050 x X 152,250 X Cash increase or decrease) 30,700 X $ 11,490 X $ -9,727 x Cash balance at beginning of month 44,000 74,700 X 86,190 x Cash balance at end of month 74,700 X $ 86,190 X $ 76,463 X Minimum cash balance 34,000 34,000 34,000 Excess (deficiency) 40,700 x 52,190 x 42,463 x Feedback Check My Work 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. a