In: Finance
Ellis Electronics Company’s actual sales and purchases for April and May are shown here, along with forecasted sales and purchases for June through September.
Sales | Purchases | |||||||
April (actual) | $ | 320,000 | $ | 130,000 | ||||
May (actual) | 300,000 | 120,000 | ||||||
June (forecast) | 275,000 | 120,000 | ||||||
July (forecast) | 275,000 | 180,000 | ||||||
August (forecast) | 290,000 | 200,000 | ||||||
September(forecast) | 330,000 | 170,000 | ||||||
The company makes 10 percent of its sales for cash and 90 percent on credit. Of the credit sales, 20 percent are collected in the month after the sale and 80 percent are collected two months after. Ellis pays for 40 percent of its purchases in the month after purchase and 60 percent two months after.
Labour expense equals 10 percent of the current month’s sales.
Overhead expense equals $12,000 per month. Interest payments of
$30,000 are due in June and September. A cash dividend of $50,000
is scheduled to be paid in June. Tax payments of $25,000 are due in
June and September. There is a scheduled capital outlay of $300,000
in September.
Ellis Electronics’ ending cash balance in May is $20,000. The
minimum desired cash balance is $15,000.
a. Prepare a schedule of monthly cash receipts for
June through September.
Ellis Electronics |
||||||||||||
April | May | June | July | August | September | |||||||
Sales | $ | $ | $ | $ | $ | $ | ||||||
Credit sales | ||||||||||||
Cash sales | ||||||||||||
Collections in month after sale | ||||||||||||
Collections second month after sale | ||||||||||||
Total cash receipts | $ | $ | $ | $ | ||||||||
b. Prepare the monthly cash payments for June through September.
Ellis Electronics |
||||||||||||
April | May | June | July | August | September | |||||||
Purchases | $ | $ | $ | $ | $ | $ | ||||||
Payments in the month after purchase | ||||||||||||
Payments second month after purchase | ||||||||||||
Labour expense | ||||||||||||
Overhead | ||||||||||||
Interest payments | ||||||||||||
Cash dividend | ||||||||||||
Taxes | ||||||||||||
Capital outlay | ||||||||||||
Total cash payments | $ | $ | $ | $ | ||||||||
c. Prepare a complete monthly cash budget with
borrowing and repayments for June through September. The maximum
desired cash balance is $50,000. Excess cash (above $50,000) is
used to buy marketable securities. Marketable securities are sold
before borrowing funds in case of a cash shortfall (less than
$15,000). (Omit $ sign in your response. Do not leave any
empty spaces; input a 0 wherever it is required. Negative answers
and amounts to be deducted should be indicated by a minus
sign.)
The reply is in three tables. Table (a) is giving monthly schedule of Cash receipts from June to September;
Table (b) Giving monthly schedule of Payments from June to September
Table(c) giving monthly cash budget from June to September