Cash Budget 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 $137,000 $167,000 $229,000 Manufacturing costs 58,000 72,000 82,000 Selling and administrative expenses 40,000 45,000 50,000 Capital expenditures 55,000 The company expects to sell about 10% of its merchandise for cash. following month (second month following sale). Depreciation, insurance, and property tax expense represent $7,000 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. sales on account, 70% are expected to be collected in the month following the sale and the remainder the Current assets as of May 1 include cash of $52,000, marketable securities of $74,000, and accounts receivable of $153,000 ($120,000 from April sales and $33,000 from March sales). Sales on account for March and April were $110,000 and $120,000, respectively. Current liabilities as of May 1 include $13,000 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 $7,000 is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $41,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Prepare a monthly cash budget and supporting schedules for May June and July and put all amount as positive values except overall cash decrease in deficiency which should be indicated with a minus sign Sonoma Housewares Inc. Cash budget For the Three months Ending July 31 May June July Estimated cash receipts from: Cash sales Collection of accounts receivables 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 or (decrease) Cash balance at end Of month Minimum cash balance Excess (deficiency)

Cash Budget
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
$137,000 $167,000
$229,000
Manufacturing costs
58,000
72,000
82,000
Selling and administrative expenses
40,000
45,000
50,000
Capital expenditures
55,000
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 $7,000 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 $52,000, marketable securities of $74,000, and accounts receivable of $153,000 ($120,000 from April sales and $33,000 from March
sales). Sales on account for March and April were $110,000 and $120,000, respectively. Current liabilities as of May 1 include $13,000 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 $7,000 is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $41,000.
Required:

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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