PR 22-5A Cash Budget Obj. 5 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: Sales Manufacturing costs Selling and administrative expenses Capital expenditures September $250,000 150,000 42,000 Instructions October $300,000 180,000 48,000 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 $50,000 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. November $315,000 185,000 51,000 Current assets as of September 1 include cash of $40,000, marketable securities of $75,000, and accounts receivable of $300,000 ($60,000 from July sales and $240,000 from August sales). Sales on account for July and August were $200,000 and $240,000, respectively. Current liabilities as of September 1 include $40,000 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 $55,000 will be made in October. Bridgeport's regular quarterly dividend of $25,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $50,000. Answer Check Figure: November deficiency, $(8,500) 2. 200,000 1. Prepare a monthly cash budget and supporting schedules for September, October, and November. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
PR 22-5A Cash Budget Obj. 5 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: Sales Manufacturing costs Selling and administrative expenses Capital expenditures September $250,000 150,000 42,000 Instructions October $300,000 180,000 48,000 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 $50,000 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. November $315,000 185,000 51,000 Current assets as of September 1 include cash of $40,000, marketable securities of $75,000, and accounts receivable of $300,000 ($60,000 from July sales and $240,000 from August sales). Sales on account for July and August were $200,000 and $240,000, respectively. Current liabilities as of September 1 include $40,000 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 $55,000 will be made in October. Bridgeport's regular quarterly dividend of $25,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $50,000. Answer Check Figure: November deficiency, $(8,500) 2. 200,000 1. Prepare a monthly cash budget and supporting schedules for September, October, and November. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Question
Transcribed Image Text:ⒸPR 22-5A Cash Budget
Obj. 5 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:
Sales
Manufacturing costs
Selling and administrative
expenses
Capital expenditures
September
$250,000
150,000
42,000
October
$300,000
180,000
48,000
Answer
Check Figure: November deficiency, $(8,500)
2.
November
$315,000
185,000
51,000
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 $50,000 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.
200,000
Current assets as of September 1 include cash of $40,000, marketable securities of $75,000,
and accounts receivable of $300,000 ($60,000 from July sales and $240,000 from August
sales). Sales on account for July and August were $200,000 and $240,000, respectively.
Current liabilities as of September 1 include $40,000 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 $55,000 will be made in
October. Bridgeport's regular quarterly dividend of $25,000 is expected to be declared in
October and paid in November. Management desires to maintain a minimum cash balance
of $50,000.
Instructions
1. Prepare a monthly cash budget and supporting schedules for September, October, and
November.
On the basis of the cash budget prepared in part (1), what recommendation
should be made to the controller?
Transcribed Image Text:Estimated cash receipts from:
Cash sales
Collections from accounts receivable
Total cash receipts
Estimated cash payments for:
Manufacturing costs
Selling and administrative expenses
Capital expenditures
Other purposes:
Income tax
Dividends
Total cash payments
Cash increase (decrease)
Cash balance at beginning of month
Cash balance at end of month
Minimum cash balance
Excess (deficiency)
Supporting calculations:
Collections of accounts receivable:
July sales
August sales:
Bridgeport Housewares Inc.
Cash Budget
For the Three Months Ending November 30
September
October
Collected in September
Collected in October
September sales:
Collected in October
Collected in November
October sales
Totals
Payments for manufacturing costs:
Paid in September:
Incurred in August
Incurred in September
Total
Paid in October:
Incurred in September
Incurred in October
Total
Paid in November
Incurred in October
Incurred in November
Total
25,000
228,000
$ 253,000
$
$ (120,000)
(42,000)
-0
-0
-0
$ (162,000)
$
91,000
40,000
$ 131,000
(50,000)
81,000
$
Sales on
Account
Costs on
Account
30,000
229,500
$ 259,500
$
$ (124,000)
(48,000)
-0
(55,000)
-0
$ (227,000)
$
32,500
131,000
$ 163,500
(50,000)
$ 113,500
Percentage
Percentage
November
$ 31,500
256,500
288,000
$
$ (134,000)
(51,000)
(200,000)
(25,000)
$ (410,000)
$ (122,000)
163,500
41,500
(50,000)
(8,500)
$
$
-0
September
$ 150,000
$
50,000
(100,000)
-0
120,000
Payments
October
-0
$ 124,000
*
November
$ 134,000
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