The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly

Question

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 $9,000 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 ($80,000 from July sales and $21,900 from August sales). Sales on account for July and August were $73,000 and $80,000, respectively. Current liabilities as of September 1 include $9,000 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 $13,000 will be made in October. Bridgeport’s regular quarterly dividend of $9,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $34,000.

Required:

1. Prepare a monthly cash budget and supporting schedules for September, October, and November. Input all amounts as positive values except overall cash decrease and deficiency which should be indicated with a minus sign. Assume 360 days per year for interest calculations.

September October November Sales $91,000 $111,000 $151,000 Manufacturing costs 38,000 48,000 54,000 Selling and administrative expenses 32,000 33,000 57,000 Capital expenditures _ _ 36,000

Explanation / Answer

Cash Budget

Note:-    Collection of accounts receivable

73000 * 30%

=21900

80000 * 70%

= 56000

80000 * 30%

= 24000

91000*90% *70%

=57330

91000*90% *30%

=24570

$111,000 * 90%* 70%

=69930

Manufacturing costs

(38,000-9000) * 80%

=23200

(38,000-9000) * 20%

=5800

(48,000-9000) *80%

=31200

(48,000-9000) *20%

=7800

(54,000-9000) * 80%

=36000

September October November Estimated cash receipts from: Cash sales $9100 $11100 $15100 Collection of accounts receivable 77900 81330 94500 Total cash receipts 87000 92430 109600 Less : estimated cash payments for: Manufacturing costs 32200 37000 43800 Selling and administrative expenses 32000 33000 57000 Capital expenditures 36,000 Other purposes: Income tax $13,000 Dividends $9,000 Total cash payments 64200 83000 145800 Cash increase or (decrease) [Total cash receipt- Toal cash payment] 22800 9430 (36200) Plus cash balance at beginning of month $35,000 57800 67230 Cash balance at end of month 57800 67230 31030 Less : minimum cash balance $34,000 $34,000 $34,000 Excess or (deficiency) 23800 33230 (2970)

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.