Chapter 22 Budget , Cash budget The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in the month following the sale and the remainder the following month (second month after sale). Depreciation, insurance, and property tax expense represent $12,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in February, and the annual property taxes are paid in November. 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 June 1 include cash of $42,000, marketable securities of $25,000, and accounts receivable of $198,000 ($150,000 from May sales and $48,000 from April sales). Sales on account in April and May were $120,000 and $150,000, respectively. Current liabilities as of June 1 include $13,000 of accounts payable incurred in May for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of $24,000 will be made in July. Mercury Shoes' regular quarterly dividend of $15,000 is expected to be declared in July and paid in August. Management wants to maintain a minimum cash balance of $40,000. PR 22-4BCash budgetObj. 5The controller of Mercury Shoes Inc. instructs you to prepare a monthly cashbudget for the next three months. You are presented with the followingExcelbudget information:ShowMeHowJuneJulyAugust +Sales$160,000$185,000$200,000Manufacturing costs..Selling and administrative expenses..66,00082,000105,00040,00046,00051,000Capital expenditures120,000The company expects to sell about 10% of its merchandise for cash. Of sales on account,60% are expected to be collected in the month following the sale and the remainder thefollowing month (second month after sale). Depreciation, insurance, and property taxexpense represent $12,000 of the estimated monthly manufacturing costs. The annualinsurance premium is paid in February, and the annual property taxes are paid inNovember. Of the remainder of the manufacturing costs, 80% are expected to be paid inthe month in which they are incurred and the balance in the following month.Current assets as of June 1 include cash of $42,000, marketable securities of $25,000, andaccounts receivable of $198,000 ($150,000 from May sales and $48,000 from April sales).Sales on account in April and May were $120,000 and $150,000, respectively. Currentliabilities as of June 1 include $13,000 of accounts payable incurred in May formanufacturing costs. All selling and administrative expenses are paid in cash in the periodthey are incurred. An estimated income tax payment of $24,000 will be made in July.Mercury Shoes' regular quarterly dividend of $15,000 is expected to be declared in Julyand paid in August. Management wants to maintain a minimum cash balance of $40,000. Instructions1. Prepare a monthly cash budget and supporting schedules for June, July, and August.Answer +2.On the basis of the cash budget prepared in part (1), what recommendationshould be made to the controller?

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The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in the month following the sale and the remainder the following month (second month after sale). Depreciation, insurance, and property tax expense represent $12,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in February, and the annual property taxes are paid in November. 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 June 1 include cash of $42,000, marketable securities of $25,000, and accounts receivable of $198,000 ($150,000 from May sales and $48,000 from April sales). Sales on account in April and May were $120,000 and $150,000, respectively. Current liabilities as of June 1 include $13,000 of accounts payable incurred in May for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of $24,000 will be made in July. Mercury Shoes' regular quarterly dividend of $15,000 is expected to be declared in July and paid in August. Management wants to maintain a minimum cash balance of $40,000.

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Chapter 22 Budget , Cash budget

The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in the month following the sale and the remainder the following month (second month after sale). Depreciation, insurance, and property tax expense represent $12,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in February, and the annual property taxes are paid in November. 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 June 1 include cash of $42,000, marketable securities of $25,000, and accounts receivable of $198,000 ($150,000 from May sales and $48,000 from April sales). Sales on account in April and May were $120,000 and $150,000, respectively. Current liabilities as of June 1 include $13,000 of accounts payable incurred in May for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of $24,000 will be made in July. Mercury Shoes' regular quarterly dividend of $15,000 is expected to be declared in July and paid in August. Management wants to maintain a minimum cash balance of $40,000.

PR 22-4B
Cash budget
Obj. 5
The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash
budget for the next three months. You are presented with the following
Excel
budget information:
Show
Me
How
June
July
August +
Sales
$160,000
$185,000
$200,000
Manufacturing costs..
Selling and administrative expenses..
66,000
82,000
105,000
40,000
46,000
51,000
Capital expenditures
120,000
The company expects to sell about 10% of its merchandise for cash. Of sales on account,
60% are expected to be collected in the month following the sale and the remainder the
following month (second month after sale). Depreciation, insurance, and property tax
expense represent $12,000 of the estimated monthly manufacturing costs. The annual
insurance premium is paid in February, and the annual property taxes are paid in
November. 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 June 1 include cash of $42,000, marketable securities of $25,000, and
accounts receivable of $198,000 ($150,000 from May sales and $48,000 from April sales).
Sales on account in April and May were $120,000 and $150,000, respectively. Current
liabilities as of June 1 include $13,000 of accounts payable incurred in May for
manufacturing costs. All selling and administrative expenses are paid in cash in the period
they are incurred. An estimated income tax payment of $24,000 will be made in July.
Mercury Shoes' regular quarterly dividend of $15,000 is expected to be declared in July
and paid in August. Management wants to maintain a minimum cash balance of $40,000.

Instructions
1. Prepare a monthly cash budget and supporting schedules for June, July, and August.
Answer +
2.
On the basis of the cash budget prepared in part (1), what recommendation
should be made to the controller?

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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