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:
The company expects to sell about 20% of its merchandise for cash. Of sales on account, 75% 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 $40,000 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, 90% axe 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 $65,000, and accounts receivable of $290,000 ($240,000 from December sales and $50,000 from Novembersales). Sales on account in November and December were $200,000 and $240,000, respectively. Current liabilities as of January 1 include a $50,000, 8%, 90-day note payable due March 20 and $18,000 of accounts payable incurred in December for manufacturing costs. All selling and administrative expenses are paid in cash in the period the)' are incurred. It is expected that $20,000 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 $5,000 is expected to be declared in February and paid in March. Management desires to maintain a minimum cash balance of $35,000.
Instructions
On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
College Accounting (Book Only): A Career Approach
College Accounting, Chapters 1-27
Financial Accounting
Financial & Managerial Accounting
Managerial Accounting: The Cornerstone of Business Decision-Making
Financial Accounting
Corporate Financial Accounting
Accounting (Text Only)
Accounting Information Systems
Intermediate Accounting: Reporting And Analysis
Financial And Managerial Accounting
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
College Accounting (Book Only): A Career Approach
Financial & Managerial Accounting
Statistics for Business & Economics, Revised (MindTap Course List)
Principles of Economics (MindTap Course List)
Exploring Economics
MKTG 12:STUDENT ED.-TEXT
STATISTICS F/BUSINESS+ECONOMICS-TEXT
Principles of Microeconomics (MindTap Course List)
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
Principles of Macroeconomics (MindTap Course List)
Foundations of Business (MindTap Course List)
Accounting Information Systems
Principles of Macroeconomics (MindTap Course List)
Brief Principles of Macroeconomics (MindTap Course List)
Essentials of Economics (MindTap Course List)
Pkg Acc Infor Systems MS VISIO CD
Contemporary Marketing
Fundamentals of Financial Management (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
Management, Loose-Leaf Version
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Fundamentals of Financial Management (MindTap Course List)
Essentials of Business Communication (MindTap Course List)
PAYROLL ACCT.,2019 ED.(LL)-TEXT
Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Financial Accounting
Corporate Financial Accounting
Macroeconomics
Economics For Today
Microeconomics
Purchasing and Supply Chain Management
Micro Economics For Today
Economics (MindTap Course List)
Practical Management Science
Managerial Accounting
Economics: Private and Public Choice (MindTap Course List)
MACROECONOMICS FOR TODAY
Principles of Microeconomics
Macroeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
Understanding Management (MindTap Course List)