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	$116,000		$146,000		$186,000
Manufacturing costs	49,000		63,000		67,000
Selling and administrative expenses	41,000		44,000		71,000
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 $8,000 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 $44,000, marketable securities of $63,000, and accounts receivable of $129,900 ($102,000 from July sales and $27,900 from August sales). Sales on account for July and August were $93,000 and $102,000, respectively. Current liabilities as of September 1 include $8,000 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 $18,000 will be made in October. Bridgeport’s regular quarterly dividend of $8,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $43,000.

Required:

1. Prepare a monthly cash budget and supporting schedules for September, October, and November. 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)	$	$	$

Answer 1

Bridgeport Housewares Inc.
Cash Budget
For the Three Months Ending November 30
	September	October	November
Estimated cash receipts from:
cash sales	11600[116000*10%]	14600[146000*10%]	18600[186000*10%]
Collection of accounts receivable	99300	103680	123300
Total cash receipts	110900	118280	141900
Less estimated cash payments for:
Manufacturing costs	40800	52200	58200
Selling and administrative expenses	41000	44000	71000
Capital expenditures	---------------	--------------	45000
Other purposes:
Income tax	---------------	$18000	--------------
Dividends	--------------	--------------	$8000
Total cash payments	$81800	$114200	$182200
Cash increase or (decrease)	$29100[110900-81800]	$4080[118280-114200]	$-40300[141900-182200]
Plus cash balance at beginning of month	44000	73100	$77180
Cash balance at end of month	$73100[29100+44000]	$77180[4080+73100]	36880[77180-40300]
Less minimum cash balance	43000	43000	43000
excess(deficiency)	30100	34180	-6120[36880-43000]

1)sales

	September	october	november
cash sales	11600[116000*10%]	14600[146000*10%]	18600[186000*10%]
credit sales
receipt of july sales	27900	0	0
August	71400[102000*70%]	30600[102000*30%]
september		73080[116000-11600]*70%	31320 [116000-11600]*30%
october			91980[146000-14600]70%
Total credit sales collection	99300	103680	123300 [31320+91980]

2.DEDUCT 8000 FROM MAUFACTURING COST AS THE PAYMENT DOES NOT FALL WITHIN THE GIVEN PERIOD.

	SEPTEMBER	october	novemebr
manufacturing cost	49000	63000	67000
less insurance and non cash depreciation and property tax	8000	8000	8000
net cost	41000	55000	59000
cost of august	8000
September	32800[41000*80%]	8200[41000*20%]
october		44000[55000*80%]	11000[55000*20%]
november			47200[59000*80%]
Total cash paid for manufacturing cost	40800	52200	58200

there is a mistake in question

Current assets as of September 1 include cash of $44,000, marketable securities of $63,000, and accounts receivable of $129,900 ($102,000 from July sales and $27,900 from August sales). Sales on account for July and August were $93,000 and $102,000, respectively

102000sales on account is from August not july.As teh sales on account of august is 102000