Esquire Products Inc. expects the following monthly sales: Cash sales are 40 per
ID: 2791470 • Letter: E
Question
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 31,000 units.
b. Prepare a cash receipts schedule for January through December. Assume that dollar sales in the prior December were $20,000
c. Prepare 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 $9,300 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. (Negative amounts should be indicated by a minus sign.)
e. Determine total current assets for each month. Include cash, accounts receivable, and inventory. The accounts receivable for a given month is equal to 60 percent of that month's sales. Inventory is equal to ending inventory (part a) times the cost of $1 per unit.
Explanation / Answer
Particulars January February March April May June July August Setember October November December Total a Sales $ 47,000 $ 38,000 $ 31,000 $ 33,000 $ 27,000 $ 25,000 $ 41,000 $ 45,000 $ 48,000 $ 53,000 $ 61,000 $ 43,000 $ 492,000 b Sales price per unit $ 2 $ 2 $ 2 $ 2 $ 2 $ 2 $ 2 $ 2 $ 2 $ 2 $ 2 $ 2 $ 2 c No of Units sold (a/b) 23,500 19,000 15,500 16,500 13,500 12,500 20,500 22,500 24,000 26,500 30,500 21,500 246,000 d Production per month 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 246,000 a. Generate a monthly production and inventory schedule in units. Beginning inventory in January is 31,000 units. e Opeping stock 31,000 28,000 29,500 34,500 38,500 45,500 53,500 53,500 51,500 48,000 42,000 32,000 31,000 f Add : Production (d) 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 246,000 g Less : Sales (b) (23,500) (19,000) (15,500) (16,500) (13,500) (12,500) (20,500) (22,500) (24,000) (26,500) (30,500) (21,500) (246,000) h Closing Balance (e+f+g) 28,000 29,500 34,500 38,500 45,500 53,500 53,500 51,500 48,000 42,000 32,000 31,000 31,000 b. Prepare a cash receipts schedule for January through December. Assume that dollar sales in the prior December were $20,000 i Sale in $ (a) $ 47,000 $ 38,000 $ 31,000 $ 33,000 $ 27,000 $ 25,000 $ 41,000 $ 45,000 $ 48,000 $ 53,000 $ 61,000 $ 43,000 j Receivables (60%*i) $ 28,200 $ 22,800 $ 18,600 $ 19,800 $ 16,200 $ 15,000 $ 24,600 $ 27,000 $ 28,800 $ 31,800 $ 36,600 $ 25,800 k Cash sales (40%*i) $ 18,800 $ 15,200 $ 12,400 $ 13,200 $ 10,800 $ 10,000 $ 16,400 $ 18,000 $ 19,200 $ 21,200 $ 24,400 $ 17,200 l Collection from Receivable $ 20,000 $ 28,200 $ 22,800 $ 18,600 $ 19,800 $ 16,200 $ 15,000 $ 24,600 $ 27,000 $ 28,800 $ 31,800 $ 36,600 m Total cash receipt $ 38,800 $ 43,400 $ 35,200 $ 31,800 $ 30,600 $ 26,200 $ 31,400 $ 42,600 $ 46,200 $ 50,000 $ 56,200 $ 53,800 $ 486,200 c. Prepare 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 $9,300 per month. n Payment for purchases (d*1$) $ 20,500 $ 20,500 $ 20,500 $ 20,500 $ 20,500 $ 20,500 $ 20,500 $ 20,500 $ 20,500 $ 20,500 $ 20,500 $ 20,500 $ 246,000 o Other cash payments $ 9,300 $ 9,300 $ 9,300 $ 9,300 $ 9,300 $ 9,300 $ 9,300 $ 9,300 $ 9,300 $ 9,300 $ 9,300 $ 9,300 $ 111,600 p Total payment in month $ 29,800 $ 29,800 $ 29,800 $ 29,800 $ 29,800 $ 29,800 $ 29,800 $ 29,800 $ 29,800 $ 29,800 $ 29,800 $ 29,800 $ 357,600 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. q Opening cash $ 3,000 $ 12,000 $ 25,600 $ 31,000 $ 33,000 $ 33,800 $ 30,200 $ 31,800 $ 44,600 $ 61,000 $ 81,200 $ 107,600 $ 3,000 r Add: Cash receipt (m) $ 38,800 $ 43,400 $ 35,200 $ 31,800 $ 30,600 $ 26,200 $ 31,400 $ 42,600 $ 46,200 $ 50,000 $ 56,200 $ 53,800 $ 486,200 s Less : Cash payment $ (29,800) $ (29,800) $ (29,800) $ (29,800) $ (29,800) $ (29,800) $ (29,800) $ (29,800) $ (29,800) $ (29,800) $ (29,800) $ (29,800) $ (357,600) t Closing cash $ 12,000 $ 25,600 $ 31,000 $ 33,000 $ 33,800 $ 30,200 $ 31,800 $ 44,600 $ 61,000 $ 81,200 $ 107,600 $ 131,600 $ 131,600 e. Determine total current assets for each month. Include cash, accounts receivable, and inventory. The accounts receivable for a given month is equal to 60 percent of that month's sales. Inventory is equal to ending inventory (part a) times the cost of $1 per unit. u Inventory (h*1$) $ 28,000 $ 29,500 $ 34,500 $ 38,500 $ 45,500 $ 53,500 $ 53,500 $ 51,500 $ 48,000 $ 42,000 $ 32,000 $ 31,000 $ 487,500 v Cash $ 12,000 $ 25,600 $ 31,000 $ 33,000 $ 33,800 $ 30,200 $ 31,800 $ 44,600 $ 61,000 $ 81,200 $ 107,600 $ 131,600 $ 623,400 w Receivables $ 28,200 $ 22,800 $ 18,600 $ 19,800 $ 16,200 $ 15,000 $ 24,600 $ 27,000 $ 28,800 $ 31,800 $ 36,600 $ 25,800 $ 295,200
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