1. Cash Budget

   The controller of Sonoma Housewares Inc. instructs you toprepare a monthly cash budget for the next three months. You arepresented with the following budget information:

   Cash Budget The controller of Sonoma Housewares Inc. instructs you toprepare a monthly cash budget for the next three months. You arepresented with the following budget information: May June July Sales $95,000 $122,000 $155,000 Manufacturing costs 40,000 52,000 56,000 Selling and administrative expenses 28,000 33,000 34,000 Capital expenditures _ _ 37,000 The company expects to sell about 12% of its merchandise forcash. Of sales on account, 65% are expected to be collected in themonth following the sale and the remainder the following month(second month following sale). Depreciation, insurance, andproperty tax expense represent $6,000 of the estimated monthlymanufacturing costs. The annual insurance premium is paid inSeptember, and the annual property taxes are paid in November. Ofthe remainder of the manufacturing costs, 85% are expected to bepaid in the month in which they are incurred and the balance in thefollowing month. Current assets as of May 1 include cash of $36,000, marketablesecurities of $51,000, and accounts receivable of $109,600 ($83,000from April sales and $26,600 from March sales). Sales on accountfor March and April were $76,000 and $83,000, respectively. Currentliabilities as of May 1 include $15,000 of accounts payableincurred in April for manufacturing costs. All selling andadministrative expenses are paid in cash in the period they areincurred. An estimated income tax payment of $15,000 will be madein June. Sonoma’s regular quarterly dividend of $6,000 is expectedto be declared in June and paid in July. Management wants tomaintain a minimum cash balance of $28,000. Required: 1. Prepare a monthly cash budget and supportingschedules for May, June, and July. Input all amounts as positivevalues except overall cash decrease and deficiency which should beindicated 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) $ $ $ 2. The budget indicates that the minimum cashbalance   be maintained in July. This situation canbe corrected by   and/or by the   ofthe marketable securities, if they are held for such purposes. Atthe end of May and June, the cash balance will   theminimum desired balance.

   The company expects to sell about 12% of its merchandise forcash. Of sales on account, 65% are expected to be collected in themonth following the sale and the remainder the following month(second month following sale). Depreciation, insurance, andproperty tax expense represent $6,000 of the estimated monthlymanufacturing costs. The annual insurance premium is paid inSeptember, and the annual property taxes are paid in November. Ofthe remainder of the manufacturing costs, 85% are expected to bepaid in the month in which they are incurred and the balance in thefollowing month.

   Current assets as of May 1 include cash of $36,000, marketablesecurities of $51,000, and accounts receivable of $109,600 ($83,000from April sales and $26,600 from March sales). Sales on accountfor March and April were $76,000 and $83,000, respectively. Currentliabilities as of May 1 include $15,000 of accounts payableincurred in April for manufacturing costs. All selling andadministrative expenses are paid in cash in the period they areincurred. An estimated income tax payment of $15,000 will be madein June. Sonoma’s regular quarterly dividend of $6,000 is expectedto be declared in June and paid in July. Management wants tomaintain a minimum cash balance of $28,000.

   Required:

   1. Prepare a monthly cash budget and supportingschedules for May, June, and July. Input all amounts as positivevalues except overall cash decrease and deficiency which should beindicated 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)	$	$	$

   2. The budget indicates that the minimum cashbalance   be maintained in July. This situation canbe corrected by   and/or by the   ofthe marketable securities, if they are held for such purposes. Atthe end of May and June, the cash balance will   theminimum desired balance.