Question

Cash Budget 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: September October November Sales $137,000 58,000 $173,000 74,000 $226,000 81,000 Manufacturing costs Selling and administrative expenses 48,000 52,000 86,000 Capital expenditures 54,000 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 $7,000 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 $52,000, marketable securities of $74,000, and accounts receivable of $153,000 ($120,000 from July sales and $33,000 from August sales). Sales on account for July and August were $110,000 and $120,000, respectively. Current liabilities as of September 1 include $7,000 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 $21,000 will be made in October. Bridgeport's regular quarterly dividend of $7,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $51,000. Required: 1. 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 September October November

Answer 1

cash budget Sept Elimatd (ash Rereipls D13100 Ocd NOV Cll 1036101580 Sales CuN-la) Alc Rerevables (UN-T6 Total Cash Rereips A) G4/000 36000 ,30700 139,610 580 es stimated Cash Pyments fo Monufactuning 63,800i2, 60 47, 800 Costs 84,000 selting&Administadtie8,000 expenics Capital exp 52,000 Sy,000 othen Purpae 21,C00 Income tar 7000 Dividend 2 19600 136800 Dlal (ash payments B) 95800 (51,020) $9.710 30,690 2810 Net Cash (A-B) 34900 S2000 86900 opening balante cash bal at theend 86A00 Minimum balante S,000 Slcoo Sloco C2310) Exces/(deiny) 35,900 3,10

tnom Sales Sept (0) Coltection NOv Sales cash lo) /300 22,600 13/700 (137o00x 10%) (17300xie (26cra) -on account () -10% in 'moth 108990 861310 (B10cox f (300x90 X0%) 36,990 (131o0oxto% nd Bo% in 28 mnth 103610 168580 13,00 (b) collection o accounts Receivable as on Sep: sept NOV 1otal Oct Alc Receivable dnom 33.000 33/000 July Sales (1000x 30% gY,000 C120/C0X (12000x F0%) 364000 1,20000 -Aug Sales 30%) 1,3000 36,000 ote: July and Auqust Sales given ae Sales on accou (ie 90xof Tolal Sales)

Nole: Given, Alc Retcivable balante beakup a $120000 fnom July &33,000 om August sales swnong he comet hreakup is $33,00 duom July Soles and 120000 thom Augut Sales AN-2 Monufactuing Costs oct Sep NOV Manufachwing toss 3p00 Depietiotion(a) Intiurance (paid in3an) (7000) (0o) o00) phopenty taz 74,000 Paid in Dec) S1,00 67/000 74,000 Payment -80% in Same mgmhH0,800 59200 53,600 (51,0x t0) (00xto7) 13400 10,200 (s,.00X20%) (G1000 X 20%) 63,Y00 2600 -20% in next month Tblal 40,800 CUwENt Liabiity F000 -Aug month Costs 72,6o0

2. The budget indicales thal the minimum fe maintained cash balance $51,000 November. This Stuation Can be Coteded by honvowing and/ or by marketable Sccnities, they an held fon Such puposes At Hhe end of Sseptem ben and october, the Cash balance will exceed the minimum desined balance selling af the