Following are the budgeted income statements for the second quarter of 2019 for SeaTech Inc.: April $238,000 Мay $289,000 June $323,000 Sales Cost of goods sold* Gross profit Operating expenses Operating income 163,200 193,800 214,200 $ 74,800 37,400 $ 37,400 $188,800 $ 95,200 42,500 $ 52,700 45,900 $ 62,900 Includes all product costs (i.e., direct materials, direct labor, and manufacturing overhead). T Includes all period costs (i.e., selling, general, and administrative expenses). The company expects about 30% of sales to be cash transactions. Of sales on account, 60% are expected to be collected in the first month after the sale is made, and 40% are expected to be collected in the second month after sale. Depreciation, insurance, and property taxes represent $20,400 of the estimated monthly cost of goods sold and $13,600 of the estimated monthly operating expenses. The annual insurance premium is paid in January, and the annual property taxes are paid in August. Of the remainder of the cost of goods sold and operating expenses, 80% are expected to be paid in the month in which they are incurred, and the balance is expected to be paid in the following month. Current assets as of April 1, 2019, consist of cash of $23,800 and accounts receivable of $254,660 ($178,262 from March credit sales and $76,398 from February credit sales). Current liabilities as of April 1 consist of $30,600 of accounts payable for product costs incurred in March; $7,820 of accrued liabilities for operating expenses incurred in March; and a $68,000, 12%, 120-day note payable that is due on April 17, 2019. An estimated income tax payment of $68,000 will be made in May. The regular quarterly dividend of $27,200 is expected to be declared in May and paid in June. Capital expenditures amounting to $29,240 will be made in April. Required: a. Complete the monthly cash budgets for the second quarter of 2019 using the following format. Note that the ending cash balance for June is provided as a check figure. (Use 360 days year for calculations.)
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
![Following are the budgeted income statements for the second quarter of 2019 for SeaTech Inc.:
April
$238,000
May
$289,000
June
Sales
$323,000
Cost of goods sold*
Gross profit
163,200
193,800
214, 200
$ 74,800
$ 95, 200
$108,800
Operating expenses"
Operating income
37,400
42,500
45,900
$ 37,400
$ 52,700
$ 62,900
Includes all product costs (i.e., direct materials, direct labor, and manufacturing overhead).
I Includes all period costs (i.e., selling, general, and administrative expenses).
The company expects about 30% of sales to be cash transactions. Of sales on account, 60% are expected to be collected
in the first month after the sale is made, and 40% are expected to be collected in the second month after sale.
Depreciation, insurance, and property taxes represent $20,400 of the estimated monthly cost of goods sold and $13,600
of the estimated monthly operating expenses. The annual insurance premium is paid in January, and the annual property
taxes are paid in August. Of the remainder of the cost of goods sold and operating expenses, 80% are expected to be
paid in the month in which they are incurred, and the balance is expected to be paid in the following month.
Current assets as of April 1, 2019, consist of cash of $23,800 and accounts receivable of $254,660 ($178,262 from March
credit sales and $76,398 from February credit sales). Current liabilities as of April 1 consist of $30,600 of accounts
payable for product costs incurred in March; $7,820 of accrued liabilities for operating expenses incurred in March; and a
$68,000, 12%, 120-day note payable that is due on April 17, 2019.
An estimated income tax payment of $68,000 will be made in May. The regular quarterly dividend of $27,200 is expected
to be declared in May and paid in June. Capital expenditures amounting to $29,240 will be made in April.
Required:
a. Complete the monthly cash budgets for the second quarter of 2019 using the following format. Note that the ending
cash balance for June is provided as a check figure. (Use 360 days year for calculations.)
SEATECH INC.
Cash Budget
For the months of April, May, and June 2019
April
May
June
Beginning cash balance
Cash Receipts:
$
23,800
From cash sales made in current month
71,400
86,700
96,900
From credit sales made in:
February
76,398
March
106,957
71,305
April
99,960
May
Total cash available
$
278,555 $
257,965 $
96,900
Cash Disbursements:
For cost of goods sold/operating expenses incurred in:
March
$
38,420
April
133,280
33,320
May
161.840
40.460
June
180,880
For payment of note payable and interest
For capital expenditures
29,240
For payment of income taxes
68,000
For payment of dividends
27,200
Total disbursements
Ending cash balance
$
200,940 $
263,160 $
248,540
77,615 $
(5,195) $
38,080](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F432d0e5b-976a-477c-8f94-be3c5e253b00%2F2bee8513-1cdd-4aff-9a58-35a2d2bc36df%2Fo1fpnlg_processed.png&w=3840&q=75)
![b. Assume that management of SeaTech Inc. desires to maintain a minimum cash balance of $19,000 at the beginning of
each month and has arranged a $100,000 line of credit with a local bank at an interest rate of 10% to ensure the
availability of funds. Borrowing transactions are to occur only at the end of months in which the budgeted cash balance
would otherwise fall short of the $19,000 minimum balance. Repayments of principal and interest are to occur at the end
of the earliest month in which sufficient funds are expected to be available for repayment. (Do not round intermediate
calculations. Use 360 days year for calculations.)
SEATECH INC.
Cash Budget
For the months of April, May, and June 2019
April
May
June
Beginning cash balance
Cash Receipts:
From cash sales made in current month
From credit sales made in:
$
23,800
71,400
86,700
96,900
76,398
106,957
February
March
71,305
April
99,960
66,640
May
121,380
Total cash available
Cash Disbursements:
278,555
257,965 $
284,920
For cost of goods sold/operating expenses incurred in:
March
$
38,420
Аpril
133,280
33,320
May
161,840
40,460
June
180,880
For payment of note payable and interest
For capital expenditures
29,240
For payment of income taxes
68,000
For payment of dividends
27,200
Total disbursements
200,940
$
263,160 $
248,540
Excess (deficiency) of cash available over disbursements
Borrowings
5,195
Repayments
Interest
Ending cash balance
5,195 $
%24](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F432d0e5b-976a-477c-8f94-be3c5e253b00%2F2bee8513-1cdd-4aff-9a58-35a2d2bc36df%2Fvryy4tck_processed.png&w=3840&q=75)
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