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 $250,000 $300,000 $315,000 Manufacturing costs 150,000 180,000 185,000 Selling and administrative 42,000 48,000 51,000 еxpenses Capital expenditures 200,000 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 $50,000 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 $40,000, marketable securities of $75,000, and accounts receivable of $300,000 ($60,000 from July sales and $240,000 from August sales). Sales on account for July and August were $200,000 and $240,000, respectively, Current Babilities as of September 1 include $40,000 of accounts payable incurred in August for manufacturing costs. All selling and administrative expenses are paid in cash in the penod they are incurred. An estimated income tax payment of $55,000 will be made in October Bridgeport's regular quarterly dividend of $25,000 is expected to be declared in October and paid in November, Manacement desires to maintain a minimim reh halance nf eA non

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Answer 1

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Bridgeport Housewares Inc.
Collection Budget	September	October	November	Note
Budgeted Sales Revenue	250,000.00	300,000.00	315,000.00	A
Cash sale @ 10%	25,000.00	30,000.00	31,500.00	B=A*10%
Collections of accounts receivable
Credit sale @ 90%	225,000.00	270,000.00	283,500.00	C= A*90%
70% of Credit sale in the next month		157,500.00	189,000.00	D= 70% of C of previous month.
30% of Credit sale in the 2nd month			67,500.00	E= 30% of C of September.
Collection of July	60,000.00			This is the remaining 30% of credit sales of July which is collected in September.
Collection of August		168,000.00	72,000.00	70% of $ 240000 is collected in October and remaining 30% in November.
Total Scheduled Collections	60,000.00	325,500.00	328,500.00
Payment of Manufacturing costs	September	October	November
Manufacturing costs	150,000.00	180,000.00	185,000.00
Less: Depreciation, Insurance and property tax	50,000.00	50,000.00	50,000.00
Manufacturing costs payable	100,000.00	130,000.00	135,000.00	F
80% paid in same month	80,000.00	104,000.00	108,000.00	G= F*80%
20% paid in next month		20,000.00	26,000.00	H= 20% of G of previous month.
Payment for August	40,000.00
Manufacturing costs payment	120,000.00	124,000.00	134,000.00
Cash budget	September	October	November
Cash sales	25,000.00	30,000.00	31,500.00
Collections of accounts receivable	60,000.00	325,500.00	328,500.00
Total Cash Receipts	85,000.00	355,500.00	360,000.00
Estimated cash payments for
Manufacturing costs	120,000.00	124,000.00	134,000.00
Selling & admin expenses	42,000.00	48,000.00	51,000.00
Capital Expenditure			200,000.00
Other Purposes
Income Tax		55,000.00
Dividends			25,000.00
Total cash payments	162,000.00	227,000.00	410,000.00
Cash increase or (decrease)	(77,000.00)	128,500.00	(50,000.00)
Cash Balance at the beginning of month	40,000.00	(37,000.00)	91,500.00
Cash Balance at the end of month	(37,000.00)	91,500.00	41,500.00
Minimum cash balance	50,000.00	50,000.00	50,000.00
Excess or (deficiency)	(87,000.00)	41,500.00	(8,500.00)
Answer 2
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