Book Show Me How Calculator Print Item ash Budget he controller of Bridgeport Ho

Question

Book Show Me How Calculator Print Item ash Budget he controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are resented with the following budget information: September October November $96,000 $121,000 $152,000 40,000 52,000 55,000 34,000 36,000 58,000 Sales Manufacturing costs Selling and administrative expenses Capital expenditures 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 $8,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in anuary, 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. 36,000 Current assets as of September 1 include cash of $36,000, marketable securities of $52,000, and accounts receivable of $107,100 ($84,000 from July sales and $23,100 from August sales). Sales on account for July and August were $77,000 and $84,000, respectively. Current liabilities as of September 1 include $8,000 of accounts payable incurred in August for manufacturing costs. All selling and administrative expenses are pald in cash in the period they are incurred. An estimated income tax payment of $15,000 will be made in October. Bridgeport's regular quarterly dividend of $8,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $35,000 2:00 PM 4/15/201

Explanation / Answer

WN-1: Calculation of estimated cash payments for Manufacturing costs

Sept Oct Nov Estimated cash receipts from:    Cash Sales (10% of current sales) 9600 12100 15200    Collection of accounts receivables           -70% of previous months sale 58800 67200 84700           -20% of 2 prior months sale 15400 16800 19200 Total cash receipts 83800 96100 119100 Less estimated cash payments for:    Manufacturing costs (WN-1) 33600 41600 46400    S&A expenses 34000 36000 58000    Capital expenses 0 0 36000 Other Purposes:    Income Tax 0 15000 0    Dividends 0 0 8000 Total Cash Payments 67600 92600 148400 Cash increase/decrease 16200 3500 -29300 Plus: beginning balance 36000 52200 55700 Closing balance 52200 55700 26400 Less: minimum cash balance 35000 35000 35000 Excess (deficiency) 17200 20700 -8600

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