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 $111,000   $140,000   $185,000   Manufacturing costs 47,000   60,000   67,000   Selling and administrative expenses 32,000   38,000   41,000   Capital expenditures _   _   44,000   The company expects to sell about 12% 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 $9,000 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 $42,000, marketable securities of $60,000, and accounts receivable of $123,700 ($97,000 from April sales and $26,700 from March sales). Sales on account for March and April were $89,000 and $97,000, respectively. Current liabilities as of May 1 include $11,000 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 $17,000 will be made in June. Sonoma’s regular quarterly dividend of $9,000 is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $33,000. 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 Budget For the Three Months Ending July 31   May June July Estimated cash receipts from:       Cash sales $ $ $ Collection of accounts receivable       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 beginning of month       Cash balance at end of month $ $ $ Minimum cash balance       Excess (deficiency) $ $ $

Question

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 $111,000   $140,000   $185,000  
Manufacturing costs 47,000   60,000   67,000  
Selling and administrative expenses 32,000   38,000   41,000  
Capital expenditures _   _   44,000  

The company expects to sell about 12% 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 $9,000 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 $42,000, marketable securities of $60,000, and accounts receivable of $123,700 ($97,000 from April sales and $26,700 from March sales). Sales on account for March and April were $89,000 and $97,000, respectively. Current liabilities as of May 1 include $11,000 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 $17,000 will be made in June. Sonoma’s regular quarterly dividend of $9,000 is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $33,000.

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 Budget
For the Three Months Ending July 31
  May June July
Estimated cash receipts from:      
Cash sales $ $ $
Collection of accounts receivable      
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 beginning of month      
Cash balance at end of month $ $ $
Minimum cash balance      
Excess (deficiency) $ $ $

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