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1.
SONOMA HOUSEWARES INC.
Cash Budget
For the Three Months Ending July 31, 2014
May June July
Estimated cash receipts from:
Cash sales
Problem 21(6)-4A
Name: Solution
Section:
Score: ON
Instructions
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1.
SONOMA HOUSEWARES INC.
Cash Budget
For the Three Months Ending July 31, 2014
May June July
Estimated cash receipts from:
Cash sales $ 8,600 $ 9,000 $ 9,500
Collections from accounts receivable 68,400 75,780 79,920
Total cash receipts $ 77,000 $ 84,780 $ 89,420
Estimated cash payments for:
Manufacturing costs $ 30,400 $ 34,500 $ 39,500
Selling and administrative expenses 15,000 16,000 22,000
Capital expenditures - - 80,000
Other purposes:
Income tax - 14,000 -
Dividends - - 5,000
Total cash payments $ 45,400 $ 64,500 $ 146,500
Cash increase (decrease) $ 31,600 $ 20,280 $ (57,080)
Cash balance at beginning of month 33,000 64,600 84,880
Cash balance at end of month $ 64,600 $ 84,880 $ 27,800
Minimum cash balance 30,000 30,000 30,000
Excess (deficiency) $ 34,600 $ 54,880 $ (2,200)
Supporting calculations:
2.
The budget indicates that the minimum cash balance will not be maintained in July. This is due to
the capital expenditures requiring significant cash outflows during this month. This situation can be
corrected by borrowing and/or by the sale of the marketable securities, if they are held for such
purposes. At the end of May and June, the cash balance will exceed the minimum desired balance,
and the excess could be considered for temporary investment.
June July
$ - $ -
- -
21,600 -
54,180 -
- 23,220
- 56,700
$ 75,780 $ 79,920