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	$139,000		$172,000		$225,000
Manufacturing costs	58,000		74,000		81,000
Selling and administrative expenses	49,000		52,000		86,000
Capital expenditures	_		_		54,000

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 $53,000, marketable securities of $75,000, and accounts receivable of $155,300 ($122,000 from July sales and $33,300 from August sales). Sales on account for July and August were $111,000 and $122,000, 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 $21,000 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 $52,000.

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	13,900	17,200	22,500
Credit Sales	118,700	124,170	145,890
Total cash receipts	132,600	141,370	168,390
Less estimated cash payments for:
Merchandise Inventory	48,000	62,800	71,600
Selling and Admin expenses	49,000	52,000	86,000
Capex			54,000
Other purposes:
Income tax		21,000
Dividend			8,000
Total cash payments	97,000	135,800	219,600
Excess of receipts over payment	35,600	5,570	(51,210)
Beginning cash balance	53,000	88,600	94,170
Cash balance at end of month	88,600	94,170	42,960
Minimum required	52,000	52,000	52,000
Excess or (deficiency)	36,600	42,170	(9,040)

Cash Receipts Schedule
	September	October	November
Sales	139,000	172,000	225,000
cash Sales	13,900	17,200	22,500
Credit Sales Collection
70% in next month	33,300	87,570	108,360
30% in second month	85,400	36,600	37,530
Collection from credit sales	118,700	124,170	145,890
Merchandise Payment Schedule
	September	October	November
Purchases	50,000	66,000	73,000
Paid in same month	40,000	52,800	58,400
Next month	8,000	10,000	13,200
Total payment	48,000	62,800	71,600