Answered: Prepare a monthly cash budget and…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 5PB: Cash budget The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash budget for...

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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 $148,000 $175,000 $240,000 Manufacturing costs 62,000 75,000 86,000 Selling and administrative expenses 43,000 47,000 53,000 Capital expenditures _ _ 58,000 The company expects to sell about 10% 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 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, 80% 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 $56,000, marketable securities of $80,000, and accounts receivable of $177,200 ($130,000 from December sales and $47,200 from November sales). Sales on account in November and December were $118,000 and $130,000, respectively. Current liabilities as of January 1 include a $74,000, 12%, 90-day note payable due March 20 and $6,000 of accounts payable incurred in December for manufacturing costs. It is expected that $4,400 in dividends will be received in January. An estimated income tax payment of $21,000 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 $44,000. 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 $Cash sales $Cash sales Collections of accounts receivable Collections of accounts receivable Collections of accounts receivable Collections of accounts r

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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