Question

Cash Budget

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	$89,000		$105,000		$144,000
Manufacturing costs	37,000		45,000		52,000
Selling and administrative expenses	26,000		28,000		32,000
Capital expenditures	_		_		35,000

The company expects to sell about 12% 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 $7,000 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 $34,000, marketable securities of $48,000, and accounts receivable of $99,300 ($78,000 from December sales and $21,300 from November sales). Sales on account in November and December were $71,000 and $78,000, respectively. Current liabilities as of January 1 include a $45,000, 12%, 90-day note payable due March 20 and $7,000 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 $2,700 in dividends will be received in January. An estimated income tax payment of $13,000 will be made in February. Shoe Mart's regular quarterly dividend of $7,000 is expected to be declared in February and paid in March. Management desires to maintain a minimum cash balance of $27,000.

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.

Shoe Mart Inc.
Cash Budget
For the Three Months Ending March 31
	January	February	March
Estimated cash receipts from:	````````````	`````````````	````````````
Cash sales	$10680	$12600	$17280
Collection of accounts receivable
Dividends
Total cash receipts	$89280	$90824	$105456
Estimated cash payments for:	```````````	``````````````	````````````
Manufacturing costs	$29500	$36000	$43250
Selling and administrative expenses	26000	28000	32000
Capital expenditures			35000
Other purposes:	``````````	```````````````	````````````
Note payable (including interest)			46350
Income tax		13000
Dividends			7000
Total cash payments	$55500	$77000	$163600
Cash increase (decrease)	$33780	$13824	$-58144
Cash balance at beginning of month	34000	67780	81604
Cash balance at end of month	$67780	$81604	$23460
Minimum cash balance	27000	27000	27000
Excess (deficiency)	$40780	$54604	-3540

Please help me figure out the answers for the boxes that are blank, thank you!

Answer 1

Cash Budget

	Jan	Feb	March
Estimated cash receipts from:
Cash sales	10,680	12,600	17,280
Collection of accounts receivable	75,900	78,224	88,176
Dividend received	2,700
Total cash receipts	89,280	90,824	105,456
Less estimated cash payments for:
Manufacturing costs	29,500	36,000	43,250
Selling and administrative expenses	26,000	28,000	32,000
Capital expenditures			35,000
Notes payable (incl interest)			46,350
Income tax		13,000
Dividends			7,000
Total cash payments	55,500	77,000	163,600
Cash increase/ (decrease)	33,780	13,824	(58,144)
Add: Opening cash balance	34,000	67,780	81,604
Closing cash balance	67,780	81,604	23,460
Less: Minimum cash balance	27,000	27,000	27,000
Excess/ (Deficiency)	40,780	54,604	(3,540)

Notes:

1. Computation of collections from customers

	Jan	Feb	March
Collection for Nov sales	21,300
Collection for Dec sales	54,600	23,400
Collection for Jan sales		54,824	23,496
Collection for Feb sales			64,680
Total cash collection	75,900	78,224	88,176

2. Computation of cash payment of manufacturing costs

	Jan	Feb	March
Payment for Dec Manufacturing cost	7,000
Payment for Jan Manufacturing cost	22,500	7,500
Payment for Feb Manufacturing cost		28,500	9,500
Payment for Mar Manufacturing cost			33,750
TOTAL	29,500	36,000	43,250