The controller of Dash Shoes Inc. instructs you to prepare a monthly cash budget
ID: 2471881 • Letter: T
Question
The controller of Dash Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: March April May Sales $111,000 $143,000 $184,000 Manufacturing costs 47,000 61,000 66,000 Selling and administrative expenses 32,000 39,000 40,000 Capital expenditures 44,000 The company expects to sell about 15% of its merchandise for cash. Of sales on account, 60% 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 $6,000 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, 85% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of March 1 include cash of $42,000, marketable securities of $60,000, and accounts receivable of $132,600 ($97,000 from February sales and $35,600 from January sales). Sales on account for January and February were $89,000 and $97,000, respectively. Current liabilities as of March 1 include a $56,000, 12%, 90-day note payable due May 20 and $6,000 of accounts payable incurred in February for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. It is expected that $3,300 in dividends will be received in March. An estimated income tax payment of $17,000 will be made in April. Dash Shoes' regular quarterly dividend of $6,000 is expected to be declared in April and paid in May. Management desires to maintain a minimum cash balance of $33,000
prepare a monthly cash budget and supporting schedules for march, april, and may. enter an increase in the months cash balance or an excess cash amount as a positive number. enter a decrease in the months cash balance or a cash deficiency as a negative number. assume 360 days per year for interest calculation.
Explanation / Answer
Cash Budget March April May Estimated Cash Receipt From Cash Sales 16,650 21,450 27,600 Collection From Accounts Receivables 93,800 95,410 110,670 Dividends Recd. 3300 0 0 Total Cash Receipts 113,750 116,860 138,270 Estimated Cash Payments For: Manufacturing Costs 40,850 52,900 59,250 selling & Admn. Exp. 32000 39000 40000 Capital Expenditure 44000 Note Payable - 12% 56000 Interest on Notes Payable - 56000 X 12% X 3/12 1680 Income Tax 17000 Quaterly Dividend Paid 6000 Total Cash Payments 72,850 108,900 206,930 Cash Increase or (Decrease) 40,900 7,960 (68,660) Cash balance at the Beginning 42000 82,900 90,860 Cash balance at the end 82,900 90,860 22,200 Minimum Cash balance 33000 33000 33000 Excess or (Deficiency) 49,900 57,860 (10,800) Calculation of Cash Collected from Customers March April May Sales 111,000 143,000 184,000 Credit Sales (85%) 94,350 121,550 156,400 Cash Sales (15%) 16,650 21,450 27,600 Cash Collection From Accounts Receivables Jan Sales 35,600 Feb Sales 58,200 38,800 March Sales 56,610 37,740 April Sales 72,930 May Sales Total Collection From Credit Sales 93,800 95,410 110,670 Total cash Collection From Sales 110,450 116,860 138,270 Calculation of Payment of Manufacturing Costs March April May Manufacturing Costs 47,000 61,000 66,000 Less: Dep, Ins & Property Tax 6,000 6,000 6,000 Balance 41,000 55,000 60,000 Cash Payment of Manf. Costs: Feb. 6,000 March 34,850 6,150 April 46,750 8,250 May 51,000 Total Manf. Cost paid 40,850 52,900 59,250
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