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: September October November Sales $110,000 $134,000 $183,000 Manufacturing costs 46,000 58,000 66,000 Selling and administrative 39,000 40,000 70,000 expenses Capital expenditures 44,000 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 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. Current assets as of September 1 include cash of $42,000, marketable securities of $59,000, and accounts receivable of $122,400 ($26,400 from July sales and $96,000 from August sales). Sales on account for July and August were $88,000 and $96,000, respectively. Current liabilities as of September 1 include $7,000 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 declared in October and paid in November. income tax payment of $16,000 will be made October. Bridgeport's regular quarterly dividend of $7,000 is expected to Management desires to maintain a minimum cash balance of $41,000. Required: 1. Prepare a monthly cash budget and supporting schedules for September, October, and November. Assume 360 days per year for interest calculations. Bridgeport Housewares Inc. Cash Budget For the Three Months Ending November 30
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: September October November Sales $110,000 $134,000 $183,000 Manufacturing costs 46,000 58,000 66,000 Selling and administrative 39,000 40,000 70,000 expenses Capital expenditures 44,000 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 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. Current assets as of September 1 include cash of $42,000, marketable securities of $59,000, and accounts receivable of $122,400 ($26,400 from July sales and $96,000 from August sales). Sales on account for July and August were $88,000 and $96,000, respectively. Current liabilities as of September 1 include $7,000 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 declared in October and paid in November. income tax payment of $16,000 will be made October. Bridgeport's regular quarterly dividend of $7,000 is expected to Management desires to maintain a minimum cash balance of $41,000. Required: 1. Prepare a monthly cash budget and supporting schedules for September, October, and November. Assume 360 days per year for interest calculations. Bridgeport Housewares Inc. Cash Budget For the Three Months Ending November 30
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter8: Budgeting
Section: Chapter Questions
Problem 5PA: Cash budget The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash...
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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: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:
September October November
Sales
$110,000
$134,000
$183,000
Manufacturing costs
46,000
58,000
66,000
Selling and administrative
39,000
40,000
70,000
expenses
Capital expenditures
44,000
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 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.
Current assets as of September 1 include cash of $42,000, marketable securities of $59,000, and accounts receivable of $122,400 ($26,400 from July sales and
$96,000 from August sales). Sales on account for July and August were $88,000 and $96,000, respectively. Current liabilities as of September 1 include $7,000 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 $16,000 will be made in October. Bridgeport's regular quarterly dividend of $7,000 is expected to be declared in October and paid in November.
Management desires to maintain a minimum cash balance of $41,000.
Required:
1. Prepare a monthly cash budget and supporting schedules for September, October, and November. Assume 360 days per year for interest calculations.
Bridgeport Housewares Inc.
Cash Budget
For the Three Months Ending November 30
October
November
September
Estimated cash receipts from:
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Transcribed Image Text:September
October
November
Estimated cash receipts from:
Total cash receipts
Less estimated cash payments for:
Other purposes:
Total cash payments
Cash balance at end of month
Excess or (deficiency)
2. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
be maintained in November. This situation can be corrected by
The budget indicates that the minimum cash balance
of the marketable securities, if they are held for such purposes. At the end of September and October, the cash balance will
and/or by the
the minimum desired balance.
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