The controller of Dash Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:

	March		April		Can
Sales	$100,000		$121,000		$169,000
Manufacturing costs	42,000		52,000		61,000
Selling and administrative expenses	29,000		33,000		37,000
capital expenditures	_		_		41,000

The company expects to sell around 10% of its merchandise for cash. Of sales on account, 60% is expected to be collected in the month following the sale and the rest the following month (second month following the sale). Depreciation, insurance, and property tax expenses account for $9,000 of estimated monthly manufacturing costs. The annual insurance premium is paid in July and the annual property taxes are paid in November. Of the rest of the manufacturing costs, it is expected to pay 80% in the month in which they are incurred and the rest in the following month.

Current assets as of March 1 include cash of $38,000, marketable securities of $54,000, and accounts receivable of $120,000 ($88,000 of February sales and $32,000 of January sales). Sales on account for January and February were $80,000 and $88,000, respectively. Current liabilities as of March 1 include a $50,000, 12%, 90-day note payable due May 20 and $9,000 of accounts payable incurred in February for manufacturing costs. All selling and administrative expenses are paid in cash in the period in which they are incurred. It is expected to receive $3,000 in dividends in March. An estimated income tax payment of $15,000 will be made in April. Dash Shoes' regular quarterly dividend of $9,000 is expected to be declared in April and paid in May.

Required:

1. Prepare a monthly cash budget and supporting schedules for March, April, and May. Enter all amounts as positive values, except the decrease and general cash deficiency, which should be indicated with a minus sign. Assume 360 days per year for interest calculations.

Dash Shoes Inc.
cash budget
For the three months ending May 31, 2016
	March	April	Can
Estimated cash receipts from:
cash sales	ps	ps	ps
Collection of accounts receivable
dividends
Total cash inflows	ps	ps	ps
Estimated cash payments for:
Manufacturing costs	ps	ps	ps
Selling and administrative expenses
capital expenditures
Other purposes:
Note payable (including interest)
Income tax
dividends
Total cash payments	ps	ps	ps
Increase or (decrease) in cash	ps	ps	ps
Cash balance at the beginning of the month
Cash balance at the end of the month	ps	ps	ps
Minimum Cash Balance
Excess or (deficiency)	ps	ps	ps

2. The budget indicates that the minimum cash balance will be maintained in May. This situation can be corrected by and/or by that of marketable securities, if they are kept for such purposes. At the end of March and April, the cash balance will be the desired minimum balance.

Answer rating: 100% (QA)

Dash Shoes Inc Cash Budget for the Three Months Ending May 31 2016 March Estimated cash receipts from Cash sales 10000 Collection of accounts receivab... View the full answer