Question

Esquire Products Inc. expects the following monthly sales:

January	$	26,000	July	$	20,000
February		17,000	August		24,000
March		10,000	September		27,000
April		12,000	October		32,000
May		6,000	November		40,000
June		4,000	December		22,000
Total sales = $240,000

Cash sales are 40 percent in a given month, with the remainder going into accounts receivable. All receivables are collected in the month following the sale. Esquire sells all of its goods for $2 each and produces them for $1 each. Esquire uses level production, and average monthly production is equal to annual production divided by 12.

a. Generate a monthly production and inventory schedule in units. Beginning inventory in January is 10,000 units.
  

b. Prepare a cash receipts schedule for January through December. Assume that dollar sales in the prior December were $20,000.
  

c. Prepare a cash payments schedule for January through December. The production costs ($1 per unit produced) are paid for in the month in which they occur. Other cash payments (besides those for production costs) are $7,200 per month.
  

d. Construct a cash budget for January through December using the cash receipts schedule from part b and the cash payments schedule from part c. The beginning cash balance is $3,000, which is also the minimum desired. (Negative amounts should be indicated by a minus sign.)
  

e. Determine total current assets for each month. Include cash, accounts receivable, and inventory. The accounts receivable for a given month is equal to 60 percent of that month's sales. Inventory is equal to ending inventory (part a) times the cost of $1 per unit.
  

Answer 1

Answer a.

Answer b.

Answer c.

Answer d.

Answer e.