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:

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.

Estimated Income Statements, using Absorption and Variable Costing

Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results:

The company is evaluating a proposal to manufacture 14,400 units instead of 12,800 units, thus creating an ending inventory of 1,600 units. Manufacturing the additional units will not change sales, unit variable factory overhead costs, total fixed factory overhead cost, or total selling and administrative expenses.

a. 1. Prepare an estimated income statement, comparing operating results if 12,800 and 14,400 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank.

Feedback

a. 2. Prepare an estimated income statement, comparing operating results if 12,800 and 14,400 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank.

Estimated Income Statements, using Absorption and Variable Costing

Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results:

The company is evaluating a proposal to manufacture 24,800 units instead of 22,400 units, thus creating an ending inventory of 2,400 units. Manufacturing the additional units will not change sales, unit variable factory overhead costs, total fixed factory overhead cost, or total selling and administrative expenses.

a. 1. Prepare an estimated income statement, comparing operating results if 22,400 and 24,800 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank.

a. 2. Prepare an estimated income statement, comparing operating results if 22,400 and 24,800 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank.

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:

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 $7,000 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 ($26,700 from July sales and $97,000 from August sales). Sales on account for July and August were $89,000 and $97,000, respectively. Current liabilities as of September 1 include $7,000 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 $16,000 will be made in October. Bridgeport’s regular quarterly dividend of $7,000 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. Assume 360 days per year for interest calculations.

Service Department Charges and Activity Bases

Middler Corporation, a manufacturer of electronics and communications systems, uses a service department charge system to charge profit centers with Computing and Communications Services (CCS) service department costs. The following table identifies an abbreviated list of service categories and activity bases used by the CCS department. The table also includes some assumed cost and activity base quantity information for each service for October.

One of the profit centers for Middler Corporation is the Communication Systems (COMM) sector. Assume the following information for the COMM sector:

The sector has 5,200 employees, of whom 25% are office employees.

Almost all office employees (99%) have a computer on the network.

One hundred percent of the employees with a computer also have an e-mail account.

The average number of help desk calls for October was 1.2 calls per individual with a computer.

There are 600 additional printers, servers, and peripherals on the network beyond the personal computers.

All the nonoffice employees have been issued a handheld device.

a. Determine the service charge rate for the four CCS service categories for October.

b. Determine the charges to the COMM sector for the four CCS service categories for October.

Question 11 [15 marks]

Global Sweet Imports (Pty) Ltd imports sweets from Italy and sells the sweets to local retailers in Cape Town. The financial manager provided you with the following information and requires your assistance in compiling the cash budget for the next 3 months (August, September and October).

• Sales for June was R450 000 and July was R500 000. The budgeted sales for the next three months are:
  • August – R550 000
  • September – R300 000
  • October – R600 00
  • • 30% of sales are for cash, 60% is collected in the next month, the remaining 10% is collected in the 2^nd month following the sale.
  • The expected purchases are as follows, paid 50% cash and 50% in the next month,
    • July – R375 000 actual
    • August – R350 000
    • September – R400 000
    • October – R200 000
  • Lease payments are R15 000 per month
  • Wages and Salaries are 15% of the previous month’s sales
  • Cash dividends of R35 000 will be paid in September
  • Payment of principal and interest of R20 000 is due in August
  • Taxes of R50 000 are due in October
  • Global Sweet Imports (Pty) Ltd sub-leases part of the warehouse and receives R7000 per month cash from the sub-tenant
  • A cash purchase of equipment costing R400 000 is scheduled for December
  • Global Sweet Imports (Pty) Ltd has a cash balance of R110 000 on 1 August and wishes to maintain a minimum cash balance of R200 000 going forward

  • Required:

    Complete the cash budget for August, September and October by using the template with the below info:

  • Sales, cash, 1 month lag, 2 month lag, rental, total cash receipt

  • Purchases, cash,1 month lag, lease pmts, wages & salaries, dividends, principal + interest, taxes, cash disbursements

  • Net cash flow, Add: begin cash, ending cash, less minimum cash balance, total financing required

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:

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.

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:

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 $51,000, marketable securities of $73,000, and accounts receivable of $150,400 ($32,400 from July sales and $118,000 from August sales). Sales on account for July and August were $108,000 and $118,000, 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 $19,000 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 $50,000.

Required:

1. Prepare a monthly cash budget and supporting schedules for September, October, and November. Assume 360 days per year for interest calculations.

Required:

1. Prepare an income statement.

Prepare a statement of owner's equity (no additional investments were made during the year.)

Prepare a balance sheet.

2. Journalize the entries that were required to close the accounts at October 31. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If the balance of Nicole Gorman, Capital had instead increased $115,000 after the closing entries were posted and the withdrawals remained the same, what would have been the amount of net income or net loss?
$

The Gorman Group is a financial planning services firm owned and operated by Nicole Gorman. As of October 31, 20Y9, the end of the fiscal year, the accountant for The Gorman Group prepared an end-of-period spreadsheet, part of which follows:

Prepare a statement of stockholders’ equity. During the year, no additional Common stock was issued. If an amount box does not require an entry, leave it blank. If a Net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign.

Prepare a balance sheet.