Esquire Products Inc. expects the following monthly sales:

January $ 41,000 July $ 35,000

February 32,000 August 39,000

March 25,000 September 42,000

April 27,000 October 47,000

May 21,000 November 55,000

June 19,000 December 37,000

Total sales = $420,000

Cash sales are 40 percent in a given month, with the remainder going into accounts receivable. All receivables are collected in the month following the sale. Esquire sells all of its goods for $2 each and produces them for $1 each. Esquire uses level production, and average monthly production is equal to annual production divided by 12.

a. Generate a monthly production and inventory schedule in units.

Beginning inventory in January is 25,000 units.

Esquire Production Inc

Production and Inventory Schedule in Units

Beginning Inventory + Production - Sales = Ending Inventory

January 25,000

february

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

b. Prepare a cash receipts schedule for January through December. Assume that dollar sales in the prior December were $20,000

Cash Receipt schedules

Sales Jan Feb March Apr May June July Aug Sept Oct Nov Dec

Cash receipts

Cash Sales

Prior months

credit sales

Total Cash Receipts

c. Prepare a cash payments schedule for January through December. The production costs ($1 per unit produced) are paid for in the month in which they occur. Other cash payments (besides those for production costs) are $8,700 per month.

Constant Production Production

Cost Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

Other cash payments

Total Cash Payments

d. Construct a cash budget for January through December using the cash receipts schedule from part b and the cash payments schedule from part c. The beginning cash balance is $3,000, which is also the minimum desired. (Negative amounts should be indicated by a minus sign.)

Cash Budget Beginning

Cash Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

Net Flow Cash

Cumulative Cash Balance

Monthly loan or repayment Ending

Cash Balance

Cumulative loan balance

e. Determine total current assets for each month. Include cash, accounts receivable, and inventory. The accounts receivable for a given month is equal to 60 percent of that month's sales. Inventory is equal to ending inventory (part a) times the cost of $1 per unit.

Assets

Cash

Accounts Receivable

Inventory

Total Current Asset

January

february

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec