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 $119,000 $144,000 $196,000 Manufacturing costs 50,000 62,000 71,000 Selling and administrative expenses 35,000 39,000 43,000 Capital expenditures _ _ 47,000 The company expects to sell about 12% of its merchandise for cash. Of sales on account, 65% 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 $9,000 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 $137,250 ($104,000 from December sales and $33,250 from November sales). Sales on account in November and December were $95,000 and $104,000, respectively. Current liabilities as of January 1 include a $60,000, 12%, 90-day note payable due March 20 and $9,000 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 $3,600 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 $9,000 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.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
The controller of Shoe Mart Inc. asks you to prepare a monthly
| January | February | March | ||||
| Sales | $119,000 | $144,000 | $196,000 | |||
| 50,000 | 62,000 | 71,000 | ||||
| Selling and administrative expenses | 35,000 | 39,000 | 43,000 | |||
| Capital expenditures | _ | _ | 47,000 |
The company expects to sell about 12% of its merchandise for cash. Of sales on account, 65% are expected to be collected in full in the month following the sale and the remainder the following month.
Current assets as of January 1 include cash of $45,000, marketable securities of $64,000, and
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.
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