The controller of Sonoma Housewares Inc. instructs you to prepare a monthly cash

Question

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:

The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% 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 $3,500 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, 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 May 1 include cash of $33,000, marketable securities of $40,000, and accounts receivable of $90,000 ($72,000 from April sales and $18,000 from March sales). Sales on account for March and April were $60,000 and $72,000, respectively. Current liabilities as of May 1 include $6,000 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 $14,000 will be made in June. Sonoma’s regular quarterly dividend of $5,000 is expected to be declared in June and paid in July. Management desires to maintain a minimum cash balance of $30,000.

I filled in the table the best i could but the ? are the ones I got wrong and couldn't figure it out.

May June July Sales $86,000 $90,000 $95,000 Manufacturing costs 34,000 39,000 44,000 Selling and administrative expenses 15,000 16,000 22,000 Capital expenditures _ _ 80,000

Explanation / Answer

May June July Opening Cash balance 33000 58600 77700 Revenues : Cash collected from sales 71000 9000 9500 74600 63000 17200 Total Revenues 71000 83600 89700 Payments Manufacturing expense paid 24400 28400 32400 6000 6100 7100 Selling & admin overheads 15000 16000 22000 Income Tax paid 14000 Payment of Dividend 5000 Total Payments 45400 64500 66500 Closing Cash Balance 58600 77700 100900 Working Notes :- 1) Insurance To be paid in September Property Tax To be paid in November Depreciation Non Cash Expense Total Manu expenses 34000 39000 44000 Less : on account of above 3500 3500 3500 Net Manu Expense 30500 35500 40500

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