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: September October November Sales $114,000 $140,000 $189,000 Manufacturing costs 48,000 60,000 68,000 Selling and administrative expenses 40,000 42,000 72,000 Capital expenditures _ _ 45,000 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 $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 $43,000, marketable securities of $62,000, and accounts receivable of $127,300 ($100,000 from July sales and $27,300 from August sales). Sales on account for July and August were $91,000 and $100,000, 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 $17,000 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 $42,000.

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.

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 $114,000 $140,000 $189,000 Manufacturing costs 48,000 60,000 68,000 Selling and administrative 40,000 42,000 72,000 expenses Capital expenditures - 45,000 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 $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 $43,000, marketable securities of $62,000, and accounts receivable of $127,300 ($100,000 from July sales and $27,300 from August sales). Sales on account for July and August were $91,000 and $100,000, 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 $17,000 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 $42,000. 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. Bridgeport Housewares Inc. Cash Budget For the Three Months Ending November 30 September October November Estimated cash receipts from: Cash sales Collection of accounts receivable Total cash receipts Less estimated cash payments for: Manufacturing costs Selling and administrative expenses Capital expenditures Other purposes: Income tax Dividends Total cash payments Cash increase or decrease) Plus cash balance at beginning of month Cash balance at end of month Less minimum cash balance Excess or (deficiency)

Answer 1

Bridgeport Housewares Inc.
Cash Budget
For the Three Months Ending November 30
	September	October	November
Estimated cash receipts from:	11400	14000	18900
cash sales
Collection of accounts receivable	97300	101820	118980
Total cash receipts	108700	115820	137880
Less estimated cash payments for:
Manufacturing costs	40200	48600	57400
Selling and administrative expenses	40000	42000	72000
Capital expenditures	---------------	--------------	45000
Other purposes:
Income tax	---------------	$17000	--------------
Dividends	--------------	--------------	$9000
Total cash payments	80200	107600	183400
Cash increase or (decrease)	28500[108700-80200]	8220[115820-107600]	-45520[137880-183400]
Plus cash balance at beginning of month	43000	71500	79720
Cash balance at end of month	71500[28500+43000]	79720	34200
Less minimum cash balance	42000	42000	42000
excess(deficiency)	29500	37720	-7800

1)sales

	September	october	november
cash sales	11400[114000*10%]	14000[140000*10%]	18900[189000*10%]
credit sales
receipt of july sales	27300	0	0
August	70000[100000*70%]	30000[100000*30%]
september		71820[114000-11400]*70%	30780 [114000-11400]*30%
october			88200[140000-14000]70%
Total credit sales collection	97300	101820	118980

2.DEDUCT 9000 FROM MAUFACTURING COST AS THE PAYMENT DOES NOT FALL WITHIN THE GIVEN PERIOD.

	SEPTEMBER	october	novemebr
manufacturing cost	48000	60000	68000
less insurance and non cash depreciation and property tax	9000	9000	9000
net cost	39000	51000	59000
cost of august paid	9000
September paid	31200[39000*80%]	7800[39000*20%]
October paid		40800[51000*80%]	10200[51000*20%]
November paid			47200[59000*80%]
Total cash paid for manufacturing cost	40200[9000+31200]	48600	57400