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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:

Line Item Description September October November

Sales $$120,000$ $$145,000$ $$202,000$

Manufacturing costs $50,00062,00073,000$

Selling and administrative expenses $42,00044,00077,000$

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 $$8,000$ 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 $$46,000,$ marketable securities of $$65,000,$ and accounts receivable of $$133,800($$$28,800$ from July sales and $$105,000$ from August sales$).$ Sales on account for July and August were $$96,000$ and $$105,000,$ respectively. Current liabilities as of September $1$ include $$8,000$ 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 $$17,000$ will be made in October. Bridgeport$$s regular quarterly dividend of $$8,000$ is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $$45,000.$

Required:

Question Content Area

$1.$ 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 $30$

Line Item Description September October November

Estimated cash receipts from:

$Cash sales $Cash sales $Cash sales

Collection of accounts receivable Collection of accounts receivable Collection of accounts receivable

Total cash receipts $Total cash receipts $Total cash receipts $Total cash receipts

Less estimated cash payments for:

$Manufacturing costs $Manufacturing costs $Manufacturing costs

Selling and administrative expenses Selling and administrative expenses Selling and administrative expenses

Capital expenditures

Other purposes:

Income tax

Dividends

Total cash payments $Total cash payments $Total cash payments $Total cash payments

$Cash increase or $($decrease$)$ $Cash increase or $($decrease$)$ Cash increase or $($decrease$)$

Plus cash balance at beginning of month Plus cash balance at beginning of month Plus cash balance at beginning of month

Cash balance at end of month $Cash balance at end of month $Cash balance at end of month $Cash balance at end of month

Less minimum cash balance Less minimum cash balance Less minimum cash balance

Excess or $($deficiency$)$ $Excess or $($deficiency$)$ $Excess or $($deficiency$)$ $Excess or $($deficiency$)$

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