Question

Cash Budget The controller of Sonoma Housewares Inc. Instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: May June July Sales $88,000 $106,000 $147,000 Manufacturing costs 37,000 46,000 53,000 Selling and administrative expenses 26,000 29,000 32,000 Capital expenditures - - 35,000 The company expects to sell about 12% of its merchandise for cash. Of sales on account, 65% we expected to be collected in the month following the sale and the remainder the following month(second month following sale). Depredation, Insurance and property tax expense represent $8,000 of the estimated monthly manufacturing costs. The annual Insurance premium is paid in September, and the annual property taxes are paid in November of the remainder of the manufacturing costs, so are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of May 1 Indude cash of $33,000, marketable securities of $40,000, and accounts receivable of $101.500 (577,000 from April sales and 524,500 from March sales). Sales on account for March and April were $70,000 and $77,000, respectively. Current abities as of May 1 Indude $15,000 of accounts payable incurred in April 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 June. Sonoma's regular quarterly dividend of $8,000 is expected to be dedared in June and paid in My Management wants to maintain minimum cash balance of $26.000. Required: 1. Prepare a monthly cash budget and supporting schedules for May June, and My.Input all amounts as positive values except overall cash decrease and deficiency which should be indicated with a minus sign. Soma Housewares Inc Cash Budget For the three months Ending July 31 May June Estimated cash recots from July Collection of accounts receivable Totalcan recept Estimated cash pements for Manufacturing Selling and administrative expenses DOJO 10000 bad but

Answer 1

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Sonoma
Collection Budget	May	June	July
Budgeted Sales Revenue	88,000.00	106,000.00	147,000.00	A
Cash sale @ 12%	10,560.00	12,720.00	17,640.00	B=A*12%
Collections of accounts receivable
Credit sale @ 88%	77,440.00	93,280.00	129,360.00	C= A*88%
65% of Credit sale in the next month		50,336.00	60,632.00	D= 65% of C of previous month.
35% of Credit sale in the 2nd month			27,104.00	E= 35% of C of May.
Collection of March	24,500.00			This is the remaining 35% if credit sales of March which will be collected in May.
Collection of April		50,050.00	26,950.00	65% of $ 77000 will be collected in June and remaining 35% in July.
Total Scheduled Collections	24,500.00	100,386.00	114,686.00
Payment of Manufacturing costs	May	June	July
Manufacturing costs	37,000.00	46,000.00	53,000.00
Less: Depreciation, Insurance and property tax	8,000.00	8,000.00	8,000.00
Manufacturing costs payable	29,000.00	38,000.00	45,000.00	F
80% paid in same month	23,200.00	30,400.00	36,000.00	G= F*80%
20% paid in next month		5,800.00	7,600.00	H= 20% of G of previous month.
Payment for April	15,000.00
Manufacturing costs payment	38,200.00	36,200.00	43,600.00
Cash budget	May	June	July
Cash sales	10,560.00	12,720.00	17,640.00
Collections of accounts receivable	24,500.00	100,386.00	114,686.00
Total Cash Receipts	35,060.00	113,106.00	132,326.00
Estimated cash payments for
Manufacturing costs	38,200.00	36,200.00	43,600.00
Selling & admin expenses	26,000.00	29,000.00	32,000.00
Capital Expenditure			35,000.00
Other Purposes
Income Tax		13,000.00
Dividends			8,000.00
Total cash payments	64,200.00	78,200.00	118,600.00
Cash increase or (decrease)	(29,140.00)	34,906.00	13,726.00
Cash Balance at the beginning of month	33,000.00	3,860.00	38,766.00
Cash Balance at the end of month	3,860.00	38,766.00	52,492.00
Minimum cash balance	26,000.00	26,000.00	26,000.00
Excess deficiency	(22,140.00)	12,766.00	26,492.00
Answer 2
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