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 $119,000   $149,000   $202,000   Manufacturing costs 50,000   64,000   73,000   Selling and administrative expenses 42,000   45,000   77,000   Capital expenditures _   _   48,000   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 $45,000, marketable securities of $64,000, and accounts receivable of $132,500 ($104,000 from July sales and $28,500 from August sales). Sales on account for July and August were $95,000 and $104,000, 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 $18,000 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 $44,000. 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   September October November Estimated cash receipts from:       Cash sales  $ $ $ Collection of accounts receivable        Total cash receipts $ $ $ Less estimated cash payments for:       Manufacturing costs  $ $ $ Selling and administrative expenses        Capital expenditures        Other purposes:       Income tax        Dividends        Total cash payments $ $ $ Cash increase or (decrease)  $ $   Plus cash balance at beginning of month        Cash balance at end of month $ $ $ Less minimum cash balance        Excess or (deficiency) $ $ $ 2.  On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller? The budget indicates that the minimum cash balance will not  be maintained in November. This situation can be corrected by investing  and/or by the purchase  of the marketable securities, if they are held for such purposes. At the end of September and October, the cash balance will exceed  the minimum desired balance.

Question

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 $119,000   $149,000   $202,000  
Manufacturing costs 50,000   64,000   73,000  
Selling and administrative expenses 42,000   45,000   77,000  
Capital expenditures _   _   48,000  

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 $45,000, marketable securities of $64,000, and accounts receivable of $132,500 ($104,000 from July sales and $28,500 from August sales). Sales on account for July and August were $95,000 and $104,000, 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 $18,000 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 $44,000.

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
  September October November
Estimated cash receipts from:      
Cash sales  $ $ $
Collection of accounts receivable       
Total cash receipts $ $ $
Less estimated cash payments for:      
Manufacturing costs  $ $ $
Selling and administrative expenses       
Capital expenditures       
Other purposes:      
Income tax       
Dividends       
Total cash payments $ $ $
Cash increase or (decrease)  $ $  
Plus cash balance at beginning of month       
Cash balance at end of month $ $ $
Less minimum cash balance       
Excess or (deficiency) $ $ $

2.  On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?

The budget indicates that the minimum cash balance will not  be maintained in November. This situation can be corrected by investing  and/or by the purchase  of the marketable securities, if they are held for such purposes. At the end of September and October, the cash balance will exceed  the minimum desired balance.

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Accounting

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: Cost of Units Transferred Out and Ending Work in Process The costs per equivalent unit of direct mat...

A: Calculation of cost of completed and transferred-out production and inventory in process, ending:

Q: Adjusted Trial Balance     December 31, 2014               Debit Credit Cash         6,590   ...

A: Income statement: The financial statement which reports revenues and expenses from business operatio...

Q: Please tell if the following are Assets, liabilities, or equity 1) accounts receivable 2) Smith, cap...

A: Balance sheet is a financial statement that depicts the value of assets, liabilities and capital as ...

Q: Franco and Elisa share income equally. During the current year the partnership net income was $40,00...

A: A partner’s capital account reflects the changes occurred in capital balances of the partners due to...

Q: Please solve the following then explain in steps how you solved the problem Revenue  for 2028 ???? D...

A: Statement of Retained Earning is a financial statement that represents the changes to the retained e...

Q: A hosiery buyer has an opening stock figure of $180,000, at retail, which carries a 52% markup. On M...

A: Calculate the amount of total markup.

Q: Break-even sales and sales to realize operating income For the current year ended March 31, Cosgrove...

A: Hence, 20,300 units is the breakeven sales  which is calculated by dividing total fixed costs with t...

Q: 3. Homework Chapter 10

A: Stockholders’ equity is the measure of assets staying in a business after the sum total of the liabi...

Q: E9.3B (L0 1) (LCNRV) Sunshine Company follows the practice of pricing its inventory at LCNRV, on an ...

A: Calculate the amount of Sunshine Company inventory using the LCNRV method. 

Q: The Sunshine Company has the following data in connection with its bankruptcy petition with the Secu...

A: Click to see the answer

Q: Using the information in the first pic to solve 2 and 3

A: For Qs 2 - pls see the attached table- the chart has been preapared using the data given in question...

Q: unland Company sells 200000 units for $10 a unit. Fixed costs are $350000 and net income is $250000....

A: Cost Volume Profit (CVP) Income Statement: The income statement which highlights the behavior of var...

Q: Starlight Company has inventory of 8 units at a cost of $200 each on October 1. On October 2, it pur...

A: Compute cost of goods sold for 11 units sold under LIFO method as shown below:

Q: Prepare a statement of cash flows for 2012 for Garcia Corporation Presented below is a condensed ...

A: Prepare statement of cash flows:

Q: Sandhill, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 yea...

A: Last-in-First-Out: In Last-in-first-out method, the costs of last purchase items are considered as t...

Q: Im confused on how to work the 3 parts of this question

A: Budget: A budget is referred to as a financial plan of a business. It is a statement that summarizes...

Q: Part1. Please explain how to calculate the after stock divendend for the Balance sheet given the bel...

A: Since we are entitled to answer first question as per our honor code, we’ll answer the part 1 as you...

Q: Proceeds from Notes PayableOn May 15, Maynard Co. borrowed cash from Texas Bank by issuing a 120-day...

A: Notes payable is a liability account. It records the face value of the promissory notes that a compa...

Q: At the end of the year, a company reports a balance in its Allowance for Uncollectible Accounts of $...

A: Allowance for Doubtful Accounts: This is a contra asset account to the Accounts Receivables account ...

Q: Break-Even Sales and Sales Mix for a Service Company Zero Turbulence Airline provides air transporta...

A: a.Compute the break-even number of seats sold on a single round-trip flight for the overall enterpri...

Q: Break-Even Sales and Sales Mix for a Service Company Zero Turbulence Airline provides air transporta...

A: Break even sales is the dollar amount of revenue at which a business earns a profit of zero i.e. No ...

Q: Required information   [The following information applies to the questions displayed below.]George a...

A: Click to see the answer

Q: Please solve the following calculation and describe in steps how you solved it Revenues for 2028 $30...

A: Statement of Retained Earning is a financial statement that represents the changes to the retained e...

Q: The Waldron Company produces a single product for sale. Based on current accounting records, the com...

A: Click to see the answer

Q: actory Overhead Rates, Entries, and Account Balance Sundance Solar Company operates two factories. T...

A:  Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and ...

Q: Franklin Producers sells its core product for $9 per unit and has variable costs of $7 per unit. Tot...

A: Click to see the answer

Q: The following information relates to Pharoah Company for the year 2022. Retained earnings, Janu...

A: Calculate the amount of net income.

Q: Hyde's Headphones sells deluxe headphones for $55 each. Unit variable expenses total $50. The breake...

A: Margin of Safety: Margin of safety is the excess of expected sales over the break-even sales. It is ...

Q: My text book is  Hospitality Industry Financial Accounting (4th edition). I am in chapter 11 -- PROP...

A: Capital expenditure: It refers to the amount spent on acquiring, maintaining, and improving the fixe...

Q: Diane is a single taxpayer who qualifies for the earned income credit. Diane has two qualifying chil...

A: Tax credits: Tax credit reduces the tax liability of the tax payer. Through tax credit an individual...

Q: How do i calculate the net income for a special order?   For example: Blowing Sand Company has just ...

A: Special orders decisions: Special orders are orders received at special prices and for bulk quantiti...

Q: The following information relates to a computer shop owner who makes all purchases on credit:       ...

A: Calculate the amount of total sales:

Q: How do you find the date goods are received, last day of discount, and end of credit period when the...

A: Compute the date of goods received:  The invoice is dated for November 27th. Hence, the goods are re...

Q: Listed below are five procedures followed by Gilmore Company.Indicate whether each procedure is an e...

A: Internal Control System: An internal control system is a process of assuring the organizational obje...

Q: Scott Incorporated has been in business for several months. Because of increased competition in the ...

A: Break-Even Point: A break-even point is a production level of a company where their revenue equals t...

Q: Assignment/takeAssignmentMain.do?invoker-&takeAssignmentSessionLocator=assignment-take&inprogress-f ...

A: Step 1: Calculate the Average price unit.

Q: Support Department Cost Allocation—Direct Method Charlie’s Wood Works produces wood products (e.g., ...

A: Cost allocation:The cost allocation refers to the process of allocating the costs associated with th...

Q: What is an inventory manager?

A: Inventory Management: It refers to the process of managing the Inventory or stock of raw materials, ...

Q: Equivalent Units of Production The following information concerns production in the Baking Departmen...

A: a. Number of units in work in process inventory at March 31.

Q: Suppose Casey Title Company normally charges $400 for services related to selling a house. As part o...

A: Click to see the answer

Q: Issuing Notes Payable On September 30, Bello International borrows $320,000 from Chase Bank with a 9...

A: Prepare journal entry:

Q: I am taking TCA 221 class. I am in Ch.8 now, which is ACASH. I need to use the net method of recordi...

A: Using net method:1.Required journal entry for recording purchase of inventory: Working note: Calcula...

Q: Equivalent Units of Conversion Costs The Filling Department of Eve Cosmetics Company had 3,800 ounce...

A: Equivalents units for production: The activity of a processing department in terms of fully complete...

Q: Support department cost allocation—direct method Becker Tabletops has two support departments (Janit...

A: Hence, the Janitorial department cost which is allocated to cutting department costs is $58,000. The...

Q: I have attached the Income Statement I will be referring to.  Please explain and clarify 1) What acc...

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and s...

Q: This information relates to the Cash account in the ledger of Ivanhoe Company.          Balance Sept...

A: Prepare bank reconciliation.

Q: Toulouse PLC produces three different products. The following table shows the inventory/stock valuat...

A: Lower of Cost or Value method is used by companies to determine the value at which inventory shall a...

Q: Sheridan reported the following information for the current year: Sales (58000 units) $1160000, dire...

A: Break-Even Point: It is the point of sales at which entity neither earns a profit nor suffers a loss...

Q: Break-Even Sales Currently, the unit selling price of a product is $390, the unit variable cost is $...

A: Break-even sales are the dollar measure of income at which a business procures a benefit of zero. Th...

Q: Assignment Gradebook Downloadable eTextbook ORION t Brief Exercise 19-12 Your answer is partially co...

A: Income Tax Refund:A tax refund is the difference between taxes paid and taxes owed. Each year a taxp...