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	$97,000		$125,000		$153,000
Manufacturing costs	41,000		54,000		55,000
Selling and administrative expenses	28,000		34,000		34,000
Capital expenditures	_		_		37,000

The company expects to sell about 15% 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 $10,000 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 $37,000, marketable securities of $52,000, and accounts receivable of $108,400 ($85,000 from December sales and $23,400 from November sales). Sales on account in November and December were $78,000 and $85,000, respectively. Current liabilities as of January 1 include a $49,000, 12%, 90-day note payable due March 20 and $10,000 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 $2,900 in dividends will be received in January. An estimated income tax payment of $15,000 will be made in February. Shoe Mart's regular quarterly dividend of $10,000 is expected to be declared in February and paid in March. Management desires to maintain a minimum cash balance of $29,000.

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	$fill in the blank 434e3ef89fddff6_1	$fill in the blank 434e3ef89fddff6_2	$fill in the blank 434e3ef89fddff6_3
Collection of accounts receivable	fill in the blank 434e3ef89fddff6_4	fill in the blank 434e3ef89fddff6_5	fill in the blank 434e3ef89fddff6_6
Dividends	fill in the blank 434e3ef89fddff6_7	fill in the blank 434e3ef89fddff6_8	fill in the blank 434e3ef89fddff6_9
Total cash receipts	$fill in the blank 434e3ef89fddff6_10	$fill in the blank 434e3ef89fddff6_11	$fill in the blank 434e3ef89fddff6_12
Estimated cash payments for:
Manufacturing costs	$fill in the blank 434e3ef89fddff6_13	$fill in the blank 434e3ef89fddff6_14	$fill in the blank 434e3ef89fddff6_15
Selling and administrative expenses	fill in the blank 434e3ef89fddff6_16	fill in the blank 434e3ef89fddff6_17	fill in the blank 434e3ef89fddff6_18
Capital expenditures	fill in the blank 434e3ef89fddff6_19	fill in the blank 434e3ef89fddff6_20	fill in the blank 434e3ef89fddff6_21
Other purposes:
Note payable (including interest)	fill in the blank 434e3ef89fddff6_22	fill in the blank 434e3ef89fddff6_23	fill in the blank 434e3ef89fddff6_24
Income tax	fill in the blank 434e3ef89fddff6_25	fill in the blank 434e3ef89fddff6_26	fill in the blank 434e3ef89fddff6_27
Dividends	fill in the blank 434e3ef89fddff6_28	fill in the blank 434e3ef89fddff6_29	fill in the blank 434e3ef89fddff6_30
Total cash payments	$fill in the blank 434e3ef89fddff6_31	$fill in the blank 434e3ef89fddff6_32	$fill in the blank 434e3ef89fddff6_33
Cash increase (decrease)	$fill in the blank 434e3ef89fddff6_34	$fill in the blank 434e3ef89fddff6_35	$fill in the blank 434e3ef89fddff6_36
Cash balance at beginning of month	fill in the blank 434e3ef89fddff6_37	fill in the blank 434e3ef89fddff6_38	fill in the blank 434e3ef89fddff6_39
Cash balance at end of month	$fill in the blank 434e3ef89fddff6_40	$fill in the blank 434e3ef89fddff6_41	$fill in the blank 434e3ef89fddff6_42
Minimum cash balance	fill in the blank 434e3ef89fddff6_43	fill in the blank 434e3ef89fddff6_44	fill in the blank 434e3ef89fddff6_45
Excess (deficiency)	$fill in the blank 434e3ef89fddff6_46	$fill in the blank 434e3ef89fddff6_47	fill in the blank 434e3ef89fddff6_48

2. The budget indicates that the minimum cash balance will not be maintained in March. This is due primarily to which of the following causes?

1. Capital expenditures
2. Note repayment
3. Depreciation
4. Income taxes
5. Decreased collection of accounts receivable

Select the correct answer