Cash Budget

The controller of Stanley Yelnats Inc. asks you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:

Line Item Description January February March

Sales $$142,000$ $$170,000$ $$234,000$

Manufacturing costs $60,00073,00084,000$

Selling and administrative expenses $41,00046,00051,000$

Capital expenditures $\_\_56,000$

The company expects to sell about $10\%$ 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 in 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 June, and the annual property taxes are paid in October. 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. All selling and administrative expenses are paid in the month incurred.

Current assets as of January $1$ include cash of $$54,000,$ marketable securities of $$77,000,$ and accounts receivable of $$158,200($$$124,000$ from December sales and $$34,200$ from November sales$).$ Sales on account in November and December were $$114,000$ and $$124,000,$ respectively. Current liabilities as of January $1$ include a $$71,000,12\%,90-$day note payable due March $20$ and $$6,000$ of accounts payable incurred in December for manufacturing costs. It is expected that $$4,300$ in dividends will be received in January. An estimated income tax payment of $$20,000$ will be made in February. Stanley Yelnat's regular quarterly dividend of $$6,000$ is expected to be declared in February and paid in March. Management desires to maintain a minimum cash balance of $$42,000.$

Required:

Question Content Area

$1.$ 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.

Stanley Yelnats Inc.

Cash Budget

For the Three Months Ending March $31$

Line Item Description January February March

Estimated cash receipts from:

Cash sales $Cash sales

$14,200$

$Cash sales

$17,000$

$Cash sales

$23,400$

Collections of accounts receivable Collections of accounts receivable

$121,000$

Collections of accounts receivable

$126,660$

Collections of accounts receivable

$145,440$

Dividends Dividends

$4,300$

Dividends

$0$

Dividends

$0$

Total cash receipts $Total cash receipts

$139,500$

$Total cash receipts

$143,660$

$Total cash receipts

$168,840$

Estimated cash payments for:

Manufacturing costs $Manufacturing costs

$51,900$

$Manufacturing costs

$65,050$

$Manufacturing costs

$76,350$

Selling and administrative expenses Selling and administrative expenses

$41,000$

Selling and administrative expenses

$46,000$

Selling and administrative expenses

$51,000$

Capital expenditures Capital expenditures

$0$

Capital expenditures

$0$

Capital expenditures

$56,000$

Other purposes:

Note payable $($including interest$)$ Note payable $($including interest$)$

$0$

Note payable $($including interest$)$

$0$

Note payable $($including interest$)$

$73,130$

Income taxes Income taxes

$0$

Income taxes

$20,000$

Income taxes

$0$

Dividends Dividends

$0$

Dividends

$0$

Dividends

$6,000$

Total cash payments $Total cash payments

$92,900$

$Total cash payments

$131,050$

$Total cash payments

$262,480$

Cash increase $($decrease$)$ $Cash increase $($decrease$)$

$46,600$

$Cash increase $($decrease$)$

$0$

$Cash increase $($decrease$)$

$19,570$

Cash balance at beginning of month Cash balance at beginning of month

$54,000$

Cash balance at beginning of month

$113,210$

Cash balance at beginning of month

$0$

Cash balance at end of month $Cash balance at end of month

$100,600$

$Cash balance at end of month

$113,210$

$Cash balance at end of month

$19,570$

Minimum cash balance Minimum cash balance

$42,000$

Minimum cash balance

$42,000$

Minimum cash balance

$42,000$

Excess $($deficiency$)$ $Excess $($deficiency$)$

$58,600$

$Excess $($deficiency$)$

$71,210$

Excess $($deficiency$)$

$-22,430$