Question

The treasurer of Bradly Lawn Equipment Company instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:

                                      August                       September                               October

Sales                            $310,000                     $390,000                                 $366,000

Manufacturing costs   190,000                      240,000                                   215,000

Operating expenses       56,000                      71,000                                       65,000

Capital expenditures                                       24,000

The company expects to sell about 20% of its merchandise for cash. Of sales on account, 70% are expected to be collected in full in the month following the sale and the remainder the following month. Depreciation, insurance, and property taxes represent $20,000 of the estimated monthly manufacturing costs and $4,000 of the probable monthly operating expenses.­ The annual insurance premium is paid in July, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs and operating expenses, 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 August 1 comprise cash of $32,000, marketable securities of $40,000, and accounts receivable of $261,800 ($220,000 from July sales and $41,800 from June sales). Current liabilities as of August 1 comprise a $60,000, 12%, 60‑day note payable due Septem­ber 20, $30,000 of accounts payable incurred in July for manufacturing costs, and accrued liabilities of $9,500 incurred in July for operating expenses.

       It is expected that $1 500 in dividends will be received in August. An estimated income tax payment of $21,000 will be made in September. Bradly's regular quarterly dividend of $10,000 is expected to be declared in September and paid in October. Management desires to maintain a minimum cash balance of $25,000.

Instructions

1. Prepare a monthly cash budget for August, September, and October.
2. On the basis of the cash budget prepared in (1), what recommendation should be made to the treasurer?

I am doubting myself. Can someone check my work below?

Bradly Lawn Equipment Company
Cash Budget
For the Three Months Ending October
	August	September	October
Estimated Cash Receipts from:
Cash Sales	$        62,000	$        78,000	$        73,200
Marketable Securities	$        40,000
Collections of Accounts Receivable	195,800	239,600	292,800
Dividends	1,500
Total Cash Receipts	$     299,300	$     317,600	$     366,000
Estimated Cash Payments for:
Manufacturing Costs	166,000	210,000	200,000
Operating Expenses	51,100	71,000	65,000
Capital Expenditures			24,000
Notes Payable		61,200
Dividends			10,000
Income Taxes		21,000.00
Total Cash Payments	217,100	363,200	299,000
Cash Increase (decrease)	$        82,200	$     (45,600)	$        67,000
Cash Balance at the end of the Month	32000	$        89,200	$        18,600
Minimum Cash Balance	25000	25000	25000
Excess (deficiency)	$        89,200	$        18,600	$        60,600

Answer 1

Notes for understanding:

1. Please note that marketable securities are not liquidated every time until unless needed - therefore, they will not be taken as a part of cash receipts.

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