Prob. 22–4A
1.
A / B / C / DSANTA FE HOUSEWARES INC.
Cash Budget
For the Three Months Ending October 31, 2008
August / September / October
1 / Estimated cash receipts from: / 1
2 / Cash sales / $ 63,000 / $ 71,500 / $ 84,500 / 2
3 / Collection of accounts receivablea / 485,000 / 546,900 / 620,550 / 3
4 / Dividends / 1,800 / 4
5 / Total cash receipts / $ 549,800 / $ 618,400 / 705,050 / 5
6 / Estimated cash payments for: / 6
7 / Manufacturing costsb / $ 325,000 / $ 333,000 / $ 375,000 / 7
8 / Selling and administrative expenses / 170,000 / 205,000 / 235,000 / 8
9 / Capital expenditures / 150,000 / 9
10 / Other purposes: / 10
11 / Note payable (including interest) / 103,750 / 11
12 / Income tax / 39,000 / 12
13 / Dividends / 12,000 / 13
14 / Total cash payments / $ 495,000 / $ 577,000 / $ 875,750 / 14
15 / Cash increase or (decrease) / $ 54,800 / $ 41,400 / $ (170,700) / 15
16 / Cash balance at beginning of month / 50,000 / 104,800 / 146,200 / 16
17 / Cash balance at end of month / $ 104,800 / $ 146,200 / $ (24,500) / 17
18 / Minimum cash balance / 40,000 / 40,000 / 40,000 / 18
19 / Excess or (deficiency) / $ 64,800 / $ 106,200 / $ (64,500) / 19
20 / Computations: / 20
21 / a Collections of accounts receivable: / August / September / October / 21
22 / June sales / $ 135,0001 / 22
23 / July sales / 350,0002 / $ 150,0003 / 23
24 / August sales / 396,9004 / $ 170,1005 / 24
25 / September sales / 450,4506 / 25
26 / Total / $ 485,000 / $ 546,900 / $ 620,550 / 26
27 / 1$450,000 × 30% = $135,000 / 27
28 / 2$500,000 × 70% = $350,000 / 28
29 / 3$500,000 × 30% = $150,000 / 29
30 / 4$630,000 × 90% × 70% = $396,900 / 30
31 / 5$630,000 × 90% × 30% = $170,100 / 31
32 / 6$715,000 × 90% × 70% = $450,450 / 32
33 / bPayments for manufacturing costs: / August / September / October / 33
34 / Payment of accounts payable, beginning
of month balance* / $ 65,000 / $ 65,000 / $ 67,000 / 34
35 / Payment of current month’s cost** / 260,000 / 268,000 / 308,000 / 35
36 / Total / $ 325,000 / $ 333,000 / $ 375,000 / 36
37 / *Accounts payable, August 1 balance = $65,000 / 37
38 / ($350,000 – $25,000) × 20% = 65,000 / 38
39 / ($360,000 – $25,000) × 20% = $67,000 / 39
40 / **($350,000 – $25,000) × 80% = $260,000 / 40
41 / ($360,000 – $25,000) × 80% = $268,000 / 41
42 / ($410,000 – $25,000) × 80% = $308,000 / 42
2. The budget indicates that the minimum cash balance will not be maintained in October. This is due to the capital expenditures and note repayment 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 August and September, the cash balance will exceed the minimum desired balance, and the excess could be considered for temporary investment.