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 $146,000 $185,000 $248,000 Manufacturing costs 61,000 80,000 89,000 Selling and administrative expenses 42,000 50,000 55,000 Capital expenditures 60,000 The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% 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 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 $55,000, marketable securities of $79,000, and accounts receivable of $174,800 ($128,000 from April sales and $46,800 from March sales). Sales on account for March and April were $117,000 and $128,000, respectively. Current liabilities as of May 1 include $14,000 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 $22,000 will be made in June. Sonoma's regular quarterly dividend of $7,000 is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $43,000. 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 vwith a minus sign. Sonoma Housewares Inc.
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 $146,000 $185,000 $248,000 Manufacturing costs 61,000 80,000 89,000 Selling and administrative expenses 42,000 50,000 55,000 Capital expenditures 60,000 The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% 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 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 $55,000, marketable securities of $79,000, and accounts receivable of $174,800 ($128,000 from April sales and $46,800 from March sales). Sales on account for March and April were $117,000 and $128,000, respectively. Current liabilities as of May 1 include $14,000 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 $22,000 will be made in June. Sonoma's regular quarterly dividend of $7,000 is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $43,000. 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 vwith a minus sign. Sonoma Housewares Inc.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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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
$146,000 $185,000 $248,000
Manufacturing costs
61,000
80,000
89,000
Selling and administrative expenses
42,000
50,000
55,000
Capital expenditures
60,000
The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% 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 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 $55,000, marketable securities of $79,000, and accounts receivable of $174,800 ($128,000 from April sales and $46,800 from March sales). Sales on account for
March and April were $117,000 and $128,000, respectively. Current liabilities as of May 1 include $14,000 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 $22,000 will be made in June. Sonoma's regular quarterly dividend of $7,000 is expected to be declared in June and paid
in July. Management wants to maintain a minimum cash balance of $43,000.
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.
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
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Sonoma Housewares Inc.
Cash Budget
For the Three Months Ending July 31
Мay
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)
of the
and/or by the
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