Friendship Products, Inc._Cash Budget

The controller of Friendship Products, Inc. instructs you to prepare a monthly cash budget
for the next three months.  You are presented with the following budget information:
       
  August September October
Sales  $            6,30,000  $            7,15,000  $            8,45,000
Manufacturing costs                3,50,000                3,60,000                4,10,000
Selling and Administrative expenses                1,70,000                2,05,000                2,35,000
Capital expenditures                    1,50,000
       
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 paid in July, 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 August 1 include cash of $50,000, marketable securities of $85,000, and accounts
receivable of $635,000 ($500,000 from July sales and $135,000 from June sales).  Sales on account for
June and July were $450,000 and $500,000, respectively.  Current liabilities as of August 1 include
a $100,000, 15%, 90-day note payable due October 20 and $65,000 of accounts payable incurred in
July for manufacturing costs.  All selling and administrative expenses are paid in cash 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.  Friendship’s regular quarterly dividend
of $12,000 is expected to be declared in September and paid in October.  Management desires to 
maintain a minimum cash balance of $40,000.    
       
       
Instructions      
       
1.  Prepare a monthly cash budget and supporting schedules for August, September, and October.
       
2.  On the basis of the cash budget prepared in instruction 1, what recommendation should be 
      made in to the controller?      

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Friendship Products, Inc._Cash Budget

The controller of Friendship Products, Inc. instructs you to prepare a monthly cash budget
for the next three months.  You are presented with the following budget information:
       
  August September October
Sales  $            6,30,000  $            7,15,000  $            8,45,000
Manufacturing costs                3,50,000                3,60,000                4,10,000
Selling and Administrative expenses                1,70,000                2,05,000                2,35,000
Capital expenditures                    1,50,000
       
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 paid in July, 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 August 1 include cash of $50,000, marketable securities of $85,000, and accounts
receivable of $635,000 ($500,000 from July sales and $135,000 from June sales).  Sales on account for
June and July were $450,000 and $500,000, respectively.  Current liabilities as of August 1 include
a $100,000, 15%, 90-day note payable due October 20 and $65,000 of accounts payable incurred in
July for manufacturing costs.  All selling and administrative expenses are paid in cash 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.  Friendship’s regular quarterly dividend
of $12,000 is expected to be declared in September and paid in October.  Management desires to 
maintain a minimum cash balance of $40,000.    
       
       
Instructions      
       
1.  Prepare a monthly cash budget and supporting schedules for August, September, and October.
       
2.  On the basis of the cash budget prepared in instruction 1, what recommendation should be 
      made in to the controller?      

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course-preview

275 words per page

You essay will be 275 words per page. Tell your writer how many words you need, or the pages.


12 pt Times New Roman

Unless otherwise stated, we use 12pt Arial/Times New Roman as the font for your paper.


Double line spacing

Your essay will have double spaced text. View our sample essays.


Any citation style

APA, MLA, Chicago/Turabian, Harvard, our writers are experts at formatting.


We Accept

Secure Payment
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