Problem 21(6)-4A

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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
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Section:

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Instructions
Answers are entered in the cells with gray backgrounds.
Cells with non-gray backgrounds are protected and cannot be edited.
An asterisk (*) will appear to the right of an incorrect entry. The essay answer will not be graded.
Enter a zero in cells you would otherwise leave blank.

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:

Collections of accounts receivable:

Sales on
Account Percentage May
March sales $ 60,000 30% $ 18,000
April sales:
 Collected in May 72,000 70% 50,400
Collected in June 72,000 30% -
May sales:
Collected in June 86,000 70% -
Collected in July 86,000 30% -
June sales 90,000 70% -
Totals $ 68,400

Payments for manufacturing costs:

Costs on
Account Percentage Payments
Paid in May:
Incurred in April $ 6,000
Incurred in May 30,500 80% 24,400
Total $ 30,400
Paid in June:
Incurred in May 30,500 20% $ 6,100
Incurred in June 35,500 80% 28,400
Total $ 34,500
Paid in July
Incurred in June 35,500 20% $ 7,100
Incurred in July 40,500 80% 32,400
Total $ 39,500

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