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Category > Accounting Posted 04 Aug 2017 My Price 13.00

Controller of Santa Fe Housewares Inc

Cash Budget

 

 

The Controller of Santa Fe Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:

 

 

 

 

 

 

August

 

 

September

 

 

October

 

 

Sales

 

 

630,000

 

 

715,000

 

 

845,000

 

 

Manufacturing cost

 

 

350,000

 

 

360,000

 

 

410,000

 

 

Selling and administrative expenses

 

 

170,000

 

 

205,000

 

 

205,000

 

 

Capital expenditures

 

 

150,000

 

 

    

 

 

 

The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in full in the month following the sale and the remainder the following month. Depreciation, insurance, and property tax expense represent $25,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in July, 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 August 1 include cash of $50,000, marketable securities of $85,000, and accounts receivable of $635,000 ($500,000 from July sales and $135,000 from June sales).Sales on account for June and July were $450,000 and $500,000, respectively.

 

 

Current liabilities as of August 1 include s $100,000, 15%, 90-day note payable due October 20 and $65,000 of accounts payable incurred in July for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. It is expected that $1,800 in dividends will be received in August. An estimated income tax payment of $39,000 will be made in September. Santa Fe's regular quarterly dividend of $12,000 is expected to be declared in September and paid in October. Management desires to maintain a minimum cash balance of $40,000.

 

 

Instructions:

 

 

1. Prepare a monthly cash budget and supporting schedules for August, September, and October.

 

 

2. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?

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Maurice Tutor
(5)
Status NEW Posted 04 Aug 2017 11:08 PM My Price 13.00

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