Download problem 6_4a page 255- 256

PROBLEM 6_4A PAGE 255- 256
The controller of Santa Fe House wares Inc. instructs you top prepare a monthly cash
budget for the next three months. You are presented with the following budget
information:
&nbs
p;
August
September
October
Sales
&n
bsp;
$630,000
$715,000
$845,000
Manufacturing Costs
&n
bsp;$350,000
$360,000
410,000
Selling and admin Expense
170,000
20 5,000
235,000
Capital expenditures &nb
sp;
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 aped in July, and the annual property taxes are paid in November. Of the
remainder of the manufacturing cost, 80% are expected to be paid in the month in which
they incurred and the balance of the following month.
Current asset as of August 1 include cash of $50,000, marketable securities of $85,000
and account receivable of $635,000($500,000 from July sales and $135,000 from June
sales) Sales on account for June and July were $45,000 and $500,000 respectively.
Current liabilities of August 1 include a $100,000, 155. 90 DAYS NOTE PAYABLE
DUE October 20 and $65,000 OF ACCOUNTS PAYABLE INCURRED IN July for
manufacturing costs. All selling and administrative expense are paid in cash in the 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 dividends of $12,00 is expected to be declared in September and
paid in October, management desires in maintain a minimum cash balance of $40,000
Instruction
!. 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 be the controller?
THE TEXBOOK IS :
Managerial Accounting, Ninth Edition
Carl S. Warren, University of Georgia
James M. Reeve, University of Tennessee
ISBN: 0-324-38209-X
© 2007
P6-4A)