Ch 22 HomeworkHide or show questions          eBookShow Me HowCalculatorCash BudgetThe 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: MayJuneJulySales$108,000 $133,000 $176,000 Manufacturing costs45,000 57,000 63,000 Selling and administrative expenses31,000 36,000 39,000 Capital expenditures_ _ 42,000 The company expects to sell about 10% 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 $6,000 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, 85% 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 $41,000, marketable securities of $58,000, and accounts receivable of $125,100 ($95,000 from April sales and $30,100 from March sales). Sales on account for March and April were $86,000 and $95,000, respectively. Current liabilities as of May 1 include $12,500 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 $16,000 will be made in June. Sonoma’s regular quarterly dividend of $6,000 is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $32,000.Required: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.

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Asked Sep 21, 2019
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Ch 22 Homework
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    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 $108,000   $133,000   $176,000  
    Manufacturing costs 45,000   57,000   63,000  
    Selling and administrative expenses 31,000   36,000   39,000  
    Capital expenditures _   _   42,000  

    The company expects to sell about 10% 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 $6,000 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, 85% 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 $41,000, marketable securities of $58,000, and accounts receivable of $125,100 ($95,000 from April sales and $30,100 from March sales). Sales on account for March and April were $86,000 and $95,000, respectively. Current liabilities as of May 1 include $12,500 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 $16,000 will be made in June. Sonoma’s regular quarterly dividend of $6,000 is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $32,000.

    Required:

    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.

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Expert Answer

Step 1

Attached table is the monthly cash budget for period of may , June & July- 

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Cash budget For period may, june and july All figures in $ May 41000 |July June Particulars Balanceb/f Receipts Cash from sales refer table 1 Cash from debtors (accounts receivable)- refer table 1 Total Cash available (A) 67000 75530 10800 13300 17600 91850 96430 111825 143650 176730 204955 Less: payments Payments for manufacturing costs- refer table 2 Payment of selling/admin. Expenses Capital expenditures made Income taxes paid Dividends paid Total Cash payments (B) 45650 56100 49200 31000 39000 36000 42000 16000 6000 76650 101200 143100 Cash Surplus/deficit (A-B) 67000 75530 61855

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Step 2

Table 1- for calculation of credit sales ( receivables from debtors for each period)-

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|Value in S Sales March |July April May 108000 Aug 176000 Sep June 133000 Total Sales 10800 10% 90% 17600 Cash sales 10% 13300 Credit sales 90% 119700 86000 95000 97200 158400 For March credit Sale collection-65% 55900 Credit sale collection-35%| For april 30100 credit Sale collection-65% 61750 Credit sale collection- 35%| 33250 for may 63180 credit Sale collection-65% Credit sale collection- 35% For june 34020 credit Sale collection-65% 77805 Credit sale collection- 35% For july 41895 102960 credit Sale collection-65% Credit sale collection- 35% 55440 91850 96430 144855 55440 Payments recd from debtors(accounts receivables) 111825

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Step 3

Table 2- for calculation of manufactur...

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Manufacturing cost Total Less: dep, insurance, property tax Manf cost net July 63,000 March June 45,000 6000 39,000 april May 57,000 6000 6000 51,000 12500 57,000 85% manf cost paid in same month 15% manf cost paid in following mnth 33150 43350 48450 7650 5850 Manf cost of april to be paid in May 12500 45650 Total 56100 49200

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