PR 7-4A 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: Obj. 5 October November September $250,000 $300,000 $315,000 Sales Manufacturing costs... Selling and administrative expenses Capital expenditures 150,000 180,000 185,000 42,000 48,000 51,000 200,000 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 rep- resent $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 and the balance in the following month. 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. are incurred expected to be paid in the month in which they Instructions 1. Prepare November. monthly cash budget and supporting schedules for September, October, and On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
PR 7-4A 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: Obj. 5 October November September $250,000 $300,000 $315,000 Sales Manufacturing costs... Selling and administrative expenses Capital expenditures 150,000 180,000 185,000 42,000 48,000 51,000 200,000 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 rep- resent $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 and the balance in the following month. 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. are incurred expected to be paid in the month in which they Instructions 1. Prepare November. monthly cash budget and supporting schedules for September, October, and 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
Related questions
Question
Transcribed Image Text:PR 7-4A 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:
Obj. 5
October November
September
$250,000
$300,000 $315,000
Sales
Manufacturing costs...
Selling and administrative expenses
Capital expenditures
150,000
180,000
185,000
42,000
48,000
51,000
200,000
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 rep-
resent $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
and the balance in the following month.
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.
are incurred
expected to be paid in the month in which they
Instructions
1. Prepare
November.
monthly cash budget and supporting schedules for September, October, and
On the basis of the cash budget prepared in part (1), what recommendation should
be made to the controller?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education