Esquire Products Inc. expects the following monthly sales:

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 12,000 units.
b. Determine a cash receipts schedule for January through December. Assume that dollar sales in the prior December were $20,000. Work part b using dollars.
c. Determine 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 $7,400 per month.
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.
e. Determine total current assets for each month. Include cash, accounts receivable, and inventory. Accounts receivable equal sales minus 40 percent of sales for a given month. Inventory is equal to ending inventory (part a) times the cost of $1 perunit.

Transcribed Image Text:

January.$28,000 May $8,000 S29,000 6,000 Octobe4000 42,000 24,000 September Marc. April 19,000 June 12,000 July 2000 November 14,000 August 26,000 December Total sales S264,000