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 $6,000 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 $36,000, marketable securities of $51,000, and accounts receivable of $105,800 ($83,000 from July sales and $22,800 from August sales). Sales on account for July and August were $76,000 and $83,000, respectively. Current liabilities as of September 1 include $6,000 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 $15,000 will be made in October. Bridgeport’s regular quarterly dividend of $6,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $35,000.

Required:

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

Nana Adom Company Limited is a wholesale company that deals in general goods. The following information relates to the next budget period.

1. Expenses: (in $)

Expenses are payable in the month of incurrence.

2. A contingent liability of $10,000 is expected to mature in November
3. Estimated cash balance at the end of September will be $5000. Cash balances should not be less than $10,000. Cash can be borrowed in multiples of $10,000 to finance any deficit at an interest rate of 15% per annum.
4. The sales manager's salary, which is $ 7000 per month is expected to increase by $1000 every month after June.
5. Motor vehicle will be purchased in November at $240,000. Depreciation for motor van should be calculated at 10% in December.
6. Credit purchases have been made as follows:

September      $200,000

October          $240,000

November      $200,000

December                    $300,000

75% of purchases are paid for in the month of purchase and the remainder in the month after purchase.

7. Details of expected sales (in units) are given below:

August             20,000

September       18,000

October          21,000

November       15,000

December       20,000

Sales are likely to be made at a unit price of $ 30.

8. Cash sales is expected to be made as follows: August $140,000

September                   $100,000

October                      $200,000

November                   $120,000

December                    $140,000

The pattern for the collection of debts from customers is expected to be as follows:

1. 60% in the month of sales (3% cash discount allowed).
2. 20% in the first month after the month of sale.
3. 15% in the second month after the month of sale.
4. 5% is usually regarded as bas debt

9. Excess funds are invested (in multiples of $10,000) in short term securities, at an interest rate of 20% per annum.
10. Borrowing must be paid together with any accrued interest whenever funds are available.

Required

Prepare cash budget, for the three month from October to December showing cash balance at the end of December. [15 Marks]

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 $9,000 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 $9,000 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 $20,000 will be made in October. Bridgeport’s regular quarterly dividend of $9,000 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. 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.

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 $36,000, marketable securities of $51,000, and accounts receivable of $105,800 ($83,000 from July sales and $22,800 from August sales). Sales on account for July and August were $76,000 and $83,000, 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 $14,000 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 $35,000.

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.

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 $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 $59,000, and accounts receivable of $122,400 ($96,000 from July sales and $26,400 from August sales). Sales on account for July and August were $88,000 and $96,000, 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: Please Provide Answers Only

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.

Ram Singh is employed by OM Inc., a public corporation, as an internal auditor. Information relating to his employment for the year 2019 is as follows:-

i.            In 2019 Ram received a salary of $130,000. The employer withheld $33,000 for income taxes, $2,700 for Canada pension contributions and $750 for Employment insurance. Other withholdings from the paycheck were $6,000 for contribution to the Company’s Registered Pension Plan, $600 for contributions to the Group Term Life Insurance, $1,400 for contribution to the Group Disability Plan.

The employer also contributed $6,000 to Ram’s RPP and $600 to the Group Term Life Insurance Plan.

ii.           Because Ram had to travel to various Company’s locations away from his regular workplace, the employer provided him with a yearly travelling allowance of $7,000.

iii.          OM provides three of its senior executives with an allowance to attend conventions of their choice. In 2019, Ram received $2,000 for this allowance and was not required to account for the costs. He attended one convention and incurred costs of $2,200.

iv.          Ram was provided with a car by the employer for use in business. The car was purchased in 2019.

Details relating to this car are as follows:-

                             Cost of car (including all taxes)………………………………………………$41,000

                             Operating cost paid by employer (including HST)……………………. ........ 8,400

                             Total kilometres driven…………………………………………………………15,000

                             Kilometres driven for employment purposes…………………………….......10,000

                             Re-imbursement to Company for use of car……………………….…….......$2,400

vi.          In June 2019, OM announced a new employee stock option plan. The plan allowed each employee to purchase 2,000 shares of OM at $14 per share. At the time of the announcement the shares were trading at $15 per share. On July 1^st, Ram purchased 1,000 of the shares when the shares were trading at $18 per share. On October 15^th of the same year, Ram exercised his rights and purchased the remaining 1,000 shares when the shares were trading for $20 per share.

In December Ram and his spouse wanted to go to Europe for Xmas and he sold 500 of the shares at $25 per share so that he can have funds for this trip.

Also, at the time of granting the option, the employer arranged with a local credit union to make loans available to the employees who wanted to buy the shares at a rate of 4%(fair market value of interest rates for the year 2019 was 5%). Ram took the opportunity and bought the shares.

vii.         OM introduced a holiday cruise award for executives who gave special service to the Company. Ram qualified and won the award in 2019. In March 2020, he and his spouse went on the cruise which cost $2,150. The value of the award was $3,000.

x.           Other non-cash perks received from the employer:-

                             Contributions to the R.P.P……………………………………………....$6,000

                             Contributions to a group R.R.S.P……………………………………...$2,000

                             Dental Plan valued at……………………………………………………$1,500

                             Mandatory employer-paid provincial health tax………………...........$1,700

                             Membership in the local golf club…………………………………….....$2,000

                             Hard hat and safety glasses……………………………………………….$ 450

viii.        Ram and his spouse were provided with the company’s condo in the Bahamas for one week holiday during the winter. Such accommodation during this peak period would have cost them $400 as opposed to $100 actually paid by him.

ix.          OM paid $1,000 to the Certified Public Accounting Association for Ram’s professional fees for the year. They also paid $600 for him to attend a conference on new accounting standards to be implemented in the current year.

x.           Ram also had income from investments as follows:-

              Interest earned on a joint bank account with his spouse…………………………..$3,000

              Interest on his R.R.S.P, account………………………………………………………$1,500

              Interest earned on his 2018 personal tax assessment……………………………..$ 2000

              Interest on Govt. of Cda. Treasury Bills………………………………………………..$600

              Cash dividends received from investments in a Canadian resident Corp……......$3,000

              Cash dividends received from Amazon, a U.S. public Corp………………………..$5,100

                (15% withholding taxes)

              Interest paid on money borrowed to buy shares of Amazon……………………….$4,000

xi.          In 2019, Ram gave to each of his two children, aged 5 and 7, $2,000 each of Ontario Savings bonds paying interest at 2% annually.

Required:-Following S3 of the ITA, calculate Ram’s Net Income for the year.

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