Ellis Electronics Company\'s actual sales and purchases for April and May are sh

Question

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 April (actual) May (actual) June (forecast) July (forecast) August (forecast) September (forecast) Sales Purchases $490,000 $147,000 137,000 137,000 197,000 460,000 217,000 187,000 470,000 445,000 445,000 500,000 The company makes 20 percent of its sales for cash and 80 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 20 percent of its purchases in the month after purchase and 80 percent two months after. Labour expense equals 30 percent of the current month's sales. Overhead expense equals $13,700 per month. Interest payments of $38,500 are due in June and September. A cash dividend of $58,500 is scheduled to be paid in June. Tax payments of $26,700 are due in June and September. There is a scheduled capital outlay of $470,000 in September Ellis Electronics' ending cash balance in May is $28,500. The minimum desired cash balance is $23,500

Explanation / Answer

a. Ellis Electronics Cash Receipts Schedule April May June July August September Sales 490000 470000 445000 445000 460000 500000 Credit sales (80% of sales) 392000 376000 356000 356000 368000 400000 Cash sales (20% of sales) 98000 94000 89000 89000 92000 100000 Collections in month after sale (20% of credit sales) 78400 75200 71200 71200 73600 Collections second month after sale (80% of credit sales) 313600 300800 284800 284800 Total cash receipts 477800 461000 448000 458400 b. Ellis Electronics Cash Payments Schedule April May June July August September Purchases 147000 137000 137000 197000 217000 187000 Payments in the month after purchase (20%) 29400 27400 27400 39400 43400 Payments second month after purchase (80%) 117600 109600 109600 157600 Labor expense (30% of current month's sales) 133500 133500 138000 150000 Overhead 13700 13700 13700 13700 Interest payments 38500 38500 Cash dividend 58500 Taxes 26700 26700 Capital outlay 470000 Total cash payments 415900 284200 300700 899900 c. Ellis Electronics Cash Budget June July August September Cash receipts 477800 461000 448000 458400 Cash payments 415900 284200 300700 899900 Net cash flow 61900 176800 147300 -441500 Beginning cash balance 28500 51700 51700 51700 Cumulative cash balance 90400 228500 199000 -389800 Monthly borrowing or (repayment) 0 0 0 78700 Cumulative loan balance 0 0 0 78700 Marketable securities purchased 38700 176800 147300 0 Marketable securities sold 0 0 0 362800 Cumulative marketable securities 38700 215500 362800 0 Ending cash balance 51700 51700 51700 51700

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