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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)