The controller of Sonoma Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: May June July Sales $132,000 $164,000 $210,000 Manufacturing costs 55,000 71,000 76,000 Selling and administrative expenses 38,000 44,000 46,000 Capital expenditures _ _ 111,000 The company expects to sell about 12% of its merchandise for cash. Of sales on account, 65% 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 September, 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 May 1 include cash of $50,000, marketable securities of $71,000, and accounts receivable of $153,100 ($116,000 from April sales and $37,100 from March sales). Sales on account for March and April were $106,000 and $116,000, respectively. Current liabilities as of May 1 include $13,500 of accounts payable incurred in April 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 June. Sonoma’s regular quarterly dividend of $8,000 is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $39,000. Required: Question Content Area 1. Prepare a monthly cash budget and supporting schedules for May, June, and July. Input all amounts as positive values except overall cash decrease and deficiency which should be indicated with a minus sign. Sonoma Housewares Inc.Cash BudgetFor the Three Months Ending July 31 May June July Estimated cash receipts from: Cash sales $fill in the blank ded402fc5027055_1 $fill in the blank ded402fc5027055_2 $fill in the blank ded402fc5027055_3 Collection of accounts receivable fill in the blank ded402fc5027055_4 fill in the blank ded402fc5027055_5 fill in the blank ded402fc5027055_6 Total cash receipts $fill in the blank ded402fc5027055_7 $fill in the blank ded402fc5027055_8 $fill in the blank ded402fc5027055_9 Estimated cash payments for: Manufacturing costs $fill in the blank ded402fc5027055_10 $fill in the blank ded402fc5027055_11 $fill in the blank ded402fc5027055_12 Selling and administrative expenses fill in the blank ded402fc5027055_13 fill in the blank ded402fc5027055_14 fill in the blank ded402fc5027055_15 Capital expenditures fill in the blank ded402fc5027055_16 Other purposes: Income tax fill in the blank ded402fc5027055_17 Dividends fill in the blank ded402fc5027055_18 Total cash payments $fill in the blank ded402fc5027055_19 $fill in the blank ded402fc5027055_20 $fill in the blank ded402fc5027055_21 Cash increase or (decrease) $fill in the blank ded402fc5027055_22 $fill in the blank ded402fc5027055_23 $fill in the blank ded402fc5027055_24 Cash balance at beginning of month fill in the blank ded402fc5027055_25 fill in the blank ded402fc5027055_26 fill in the blank ded402fc5027055_27 Cash balance at end of month $fill in the blank ded402fc5027055_28 $fill in the blank ded402fc5027055_29 $fill in the blank ded402fc5027055_30 Minimum cash balance fill in the blank ded402fc5027055_31 fill in the blank ded402fc5027055_32 fill in the blank ded402fc5027055_33 Excess (deficiency) $fill in the blank ded402fc5027055_34 $fill in the blank ded402fc5027055_35 $fill in the blank ded402fc5027055_36 Question Content Area 2. The budget indicates that the minimum cash balance be maintained in July. This situation can be corrected by and/or by the of the marketable securities, if they are held for such purposes. At the end of May and June, the cash balance will the minimum desired balance.
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.
The controller of Sonoma Housewares Inc. instructs you to prepare a monthly
| May | June | July | ||||
| Sales | $132,000 | $164,000 | $210,000 | |||
| 55,000 | 71,000 | 76,000 | ||||
| Selling and administrative expenses | 38,000 | 44,000 | 46,000 | |||
| Capital expenditures | _ | _ | 111,000 |
The company expects to sell about 12% of its merchandise for cash. Of sales on account, 65% are expected to be collected in the month following the sale and the remainder the following month (second month following sale).
Current assets as of May 1 include cash of $50,000, marketable securities of $71,000, and
Required:
Question Content Area
1. Prepare a monthly cash budget and supporting schedules for May, June, and July. Input all amounts as positive values except overall cash decrease and deficiency which should be indicated with a minus sign.
| May | June | July | |
| Estimated cash receipts from: | |||
| Cash sales | $fill in the blank ded402fc5027055_1 | $fill in the blank ded402fc5027055_2 | $fill in the blank ded402fc5027055_3 |
| Collection of accounts receivable | fill in the blank ded402fc5027055_4 | fill in the blank ded402fc5027055_5 | fill in the blank ded402fc5027055_6 |
| Total cash receipts | $fill in the blank ded402fc5027055_7 | $fill in the blank ded402fc5027055_8 | $fill in the blank ded402fc5027055_9 |
| Estimated cash payments for: | |||
| Manufacturing costs | $fill in the blank ded402fc5027055_10 | $fill in the blank ded402fc5027055_11 | $fill in the blank ded402fc5027055_12 |
| Selling and administrative expenses | fill in the blank ded402fc5027055_13 | fill in the blank ded402fc5027055_14 | fill in the blank ded402fc5027055_15 |
| Capital expenditures | fill in the blank ded402fc5027055_16 | ||
| Other purposes: | |||
| Income tax | fill in the blank ded402fc5027055_17 | ||
| Dividends | fill in the blank ded402fc5027055_18 | ||
| Total cash payments | $fill in the blank ded402fc5027055_19 | $fill in the blank ded402fc5027055_20 | $fill in the blank ded402fc5027055_21 |
| Cash increase or (decrease) | $fill in the blank ded402fc5027055_22 | $fill in the blank ded402fc5027055_23 | $fill in the blank ded402fc5027055_24 |
| Cash balance at beginning of month | fill in the blank ded402fc5027055_25 | fill in the blank ded402fc5027055_26 | fill in the blank ded402fc5027055_27 |
| Cash balance at end of month | $fill in the blank ded402fc5027055_28 | $fill in the blank ded402fc5027055_29 | $fill in the blank ded402fc5027055_30 |
| Minimum cash balance | fill in the blank ded402fc5027055_31 | fill in the blank ded402fc5027055_32 | fill in the blank ded402fc5027055_33 |
| Excess (deficiency) | $fill in the blank ded402fc5027055_34 | $fill in the blank ded402fc5027055_35 | $fill in the blank ded402fc5027055_36 |
Question Content Area
2. The budget indicates that the minimum cash balance
be maintained in July. This situation can be corrected by
and/or by the
of the marketable securities, if they are held for such purposes. At the end of May and June, the cash balance will
the minimum desired balance.
Cash budget records all the transactions related to inflow and outflow of cash for the month/quarter/ year as required.
Cash budget helps to determine excess cash or deficiency in cash. Any excess cash can be invested in short term investments. Any deficiency, if there can be taken place in advance.
The working is shown below:
Step by step
Solved in 4 steps
