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	$118,000		$144,000		$194,000
Manufacturing costs	50,000		62,000		70,000
Selling and administrative expenses	34,000		39,000		43,000
Capital expenditures	_		_		47,000

The company expects to sell about 12% of its merchandise for cash. Of sales on account, 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 $45,000, marketable securities of $64,000, and accounts receivable of $131,200 ($103,000 from December sales and $28,200 from November sales). Sales on account in November and December were $94,000 and $103,000, respectively. Current liabilities as of January 1 include a $59,000, 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 $3,500 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 $7,000 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.

For the Three Months Ending March 31 January February March Estimated cash receipts from: Cash sales $ $ $ Collection of accounts receivable Dividends Total cash receipts Estimated cash payments for: Manufacturing costs $ $ Selling and administrative expenses Capital expenditures Other purposes: Note payable (including interest) Accounting numeric f Income tax Dividends Total cash payments $ $ $ Cash increase (decrease) Cash balance at beginning of month Cash balance at end of month Minimum cash balance Excess (deficiency)