The controller of Shoe Mart Inc. asks you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: January February March Sales $119,000 $144,000 $196,000 Manufacturing costs 50,000 62,000 71,000 Selling and administrative expenses 35,000 39,000 43,000 Capital expenditures _ _ 47,000 The company expects to sell about 12% of its merchandise for cash. Of sales on account, 65% 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 $9,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in June, and the annual property taxes are paid in October. Of the remainder of the manufacturing costs, 75% are expected to be paid in the month in which they are incurred and the balance in the following month. All sales and administrative expenses are paid in the month incurred. Current assets as of January 1 include cash of $45,000, marketable securities of $64,000, and accounts receivable of $137,250 ($104,000 from December sales and $33,250 from November sales). Sales on account in November and December were $95,000 and $104,000, respectively. Current liabilities as of January 1 include a $60,000, 12%, 90-day note payable due March 20 and $9,000 of accounts payable incurred in December for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. It is expected that $3,600 in dividends will be received in January. An estimated income tax payment of $17,000 will be made in February. Shoe Mart's regular quarterly dividend of $9,000 is expected to be declared in February and paid in March. Management desires to maintain a minimum cash balance of $35,000. Required: 1. Prepare a monthly cash budget and supporting schedules for January, February, and March. Enter an increase in the month's cash balance or an excess cash amount as a positive number. Enter a decrease in the month's cash balance or a cash deficiency as a negative number. Assume 360 days per year for interest calculations.

The controller of Shoe Mart Inc. asks you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: January February March Sales $119,000 $144,000 $196,000 Manufacturing costs 50,000 62,000 71,000 Selling and administrative expenses 35,000 39,000 43,000 Capital expenditures _ _ 47,000 The company expects to sell about 12% of its merchandise for cash. Of sales on account, 65% 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 $9,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in June, and the annual property taxes are paid in October. Of the remainder of the manufacturing costs, 75% are expected to be paid in the month in which they are incurred and the balance in the following month. All sales and administrative expenses are paid in the month incurred. Current assets as of January 1 include cash of $45,000, marketable securities of $64,000, and accounts receivable of $137,250 ($104,000 from December sales and $33,250 from November sales). Sales on account in November and December were $95,000 and $104,000, respectively. Current liabilities as of January 1 include a $60,000, 12%, 90-day note payable due March 20 and $9,000 of accounts payable incurred in December for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. It is expected that $3,600 in dividends will be received in January. An estimated income tax payment of $17,000 will be made in February. Shoe Mart's regular quarterly dividend of $9,000 is expected to be declared in February and paid in March. Management desires to maintain a minimum cash balance of $35,000. Required: 1. Prepare a monthly cash budget and supporting schedules for January, February, and March. Enter an increase in the month's cash balance or an excess cash amount as a positive number. Enter a decrease in the month's cash balance or a cash deficiency as a negative number. Assume 360 days per year for interest calculations.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The controller of Shoe Mart Inc. asks you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:

	January	February	March
Sales	$119,000		$144,000	$196,000
Manufacturing costs	50,000		62,000	71,000
Selling and administrative expenses	35,000		39,000	43,000
Capital expenditures	_		_	47,000

The company expects to sell about 12% of its merchandise for cash. Of sales on account, 65% 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 $9,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in June, and the annual property taxes are paid in October. Of the remainder of the manufacturing costs, 75% are expected to be paid in the month in which they are incurred and the balance in the following month. All sales and administrative expenses are paid in the month incurred.

Current assets as of January 1 include cash of $45,000, marketable securities of $64,000, and accounts receivable of $137,250 ($104,000 from December sales and $33,250 from November sales). Sales on account in November and December were $95,000 and $104,000, respectively. Current liabilities as of January 1 include a $60,000, 12%, 90-day note payable due March 20 and $9,000 of accounts payable incurred in December for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. It is expected that $3,600 in dividends will be received in January. An estimated income tax payment of $17,000 will be made in February. Shoe Mart's regular quarterly dividend of $9,000 is expected to be declared in February and paid in March. Management desires to maintain a minimum cash balance of $35,000.

Required:

1. Prepare a monthly cash budget and supporting schedules for January, February, and March. Enter an increase in the month's cash balance or an excess cash amount as a positive number. Enter a decrease in the month's cash balance or a cash deficiency as a negative number. Assume 360 days per year for interest calculations.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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