Question

In: Accounting

Cash Budget The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget...

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 budgetinformation:

September October November
Sales $111,000 $139,000 $189,000
Manufacturing costs 47,000 60,000 68,000
Selling and administrative expenses 39,000 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 $10,000 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 $42,000, marketable securities of $60,000, and accounts receivable of $123,700 ($97,000 from July sales and $26,700 from August sales). Sales on account for July and August were $89,000 and $97,000, respectively. Current liabilities as of September 1 include $10,000 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 $10,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $41,000.

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:
$ $ $
Total cash receipts $ $ $
Less estimated cash payments for:
$ $ $
Other purposes:
Total cash payments $ $ $
$ $ $
Cash balance at end of month $ $ $
Excess or (deficiency) $ $ $

2. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?

The budget indicates that the minimum cash balance be maintained in November. This situation can be corrected by and/or by the of the marketable securities, if they are held for such purposes. At the end of September and October, the cash balance will the minimum desired balance.

Solutions

Expert Solution

Solution 1:

Computation of Collection from Customer
Particulars September October November
Collection for July Sales $26,700.00
Collection for August Sales $67,900.00 $29,100.00
Collection for September Sales $69,930.00 $29,970.00
Collection for October Sales $87,570.00
Total cash collections $94,600.00 $99,030.00 $117,540.00
Computation of Cash payment of manufacturing costs
Particulars September October November
Payment for August Manufacturing cost $10,000.00
Payment for September Manufacturing cost $29,600.00 $7,400.00
Payment for October Manufacturing cost $40,000.00 $10,000.00
Payment for November Manufacturing cost $46,400.00
Total cash disbursements $39,600.00 $47,400.00 $56,400.00
Bridgeport Housewares Inc.
Cash Budget
For the Three Months Ending November 30
Particulars September October November
Estimated cash receipts from:
Cash sales $11,100.00 $13,900.00 $18,900.00
Collection of accounts receivable $94,600.00 $99,030.00 $117,540.00
Total cash receipts $105,700.00 $112,930.00 $136,440.00
Less estimated cash payments for:
Manufacturing costs $39,600.00 $47,400.00 $56,400.00
Selling and administrative expenses $39,000.00 $42,000.00 $72,000.00
Capital expenditures $45,000.00
Other purposes:
Income tax $17,000.00
Dividends $10,000.00
Total cash payments $78,600.00 $106,400.00 $183,400.00
Cash increase or (decrease) $27,100.00 $6,530.00 -$46,960.00
Plus cash balance at beginning of month $42,000.00 $69,100.00 $75,630.00
Cash balance at end of month $69,100.00 $75,630.00 $28,670.00
Less minimum cash balance $41,000.00 $41,000.00 $41,000.00
Excess or (deficiency) $28,100.00 $34,630.00 -$12,330.00

Solution 2:

The budget indicates that the minimum cash balance be maintained in November. This situation can be corrected by obtaining loan and/or by selling the of the marketable securities, if they are held for such purposes. At the end of September and October, the cash balance will exceeds the minimum desired balance.


Related Solutions

The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the...
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 $106,000 $133,000 $175,000 Manufacturing costs 45,000 57,000 63,000 Selling and administrative expenses 37,000 40,000 67,000 Capital expenditures _ _ 42,000 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 controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the...
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 $117,000 $140,000 $199,000 Manufacturing costs 49,000 60,000 72,000 Selling and administrative expenses 41,000 42,000 76,000 Capital expenditures _ _ 48,000 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 controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the...
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 $92,000 $109,000 $145,000 Manufacturing costs 39,000 47,000 52,000 Selling and administrative expenses 32,000 33,000 55,000 Capital expenditures _ _ 35,000 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 controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the...
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 budgetinformation: September October November Sales $119,000 $140,000 $194,000 Manufacturing costs 50,000 60,000 70,000 Selling and administrative expenses 42,000 42,000 74,000 Capital expenditures _ _ 47,000 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...
The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the...
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 $91,000 $112,000 $144,000 Manufacturing costs 38,000 48,000 52,000 Selling and administrative expenses 32,000 34,000 55,000 Capital expenditures _ _ 35,000 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 controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the...
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 $106,000 $126,000 $175,000 Manufacturing costs 45,000 54,000 63,000 Selling and administrative expenses 37,000 38,000 67,000 Capital expenditures _ _ 42,000 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 controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the...
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 $145,000 $181,000 $232,000 Manufacturing costs 61,000 78,000 84,000 Selling and administrative expenses 51,000 54,000 88,000 Capital expenditures _ _ 56,000 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 controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the...
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 $125,000 $149,000 $199,000 Manufacturing costs 53,000 64,000 72,000 Selling and administrative expenses 44,000 45,000 76,000 Capital expenditures _ _ 48,000 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 controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the...
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 expenses 42,000 48,000 51,000 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 controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the...
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 $121,000 $155,000 $207,000 Manufacturing costs 51,000 67,000 75,000 Selling and administrative expenses 42,000 47,000 79,000 Capital expenditures _ _ 50,000 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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT