Ellis Electronics Companys 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) $480,000 $146,000

May (actual) 460,000 136,000

June (forecast) 435,000 136,000

July (forecast) 435,000 196,000

August (forecast) 450,000 216,000

September (forecast) 490,000 186,000

The company makes 10 percent of its sales for cash and 90 percent on credit. Of the credit sales, 10 percent are collected in the month after the sale and 90 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 30 percent of the current month's sales. Overhead expense equals $13,600 per month. Interest payments of $38,000 are due in June and September. A cash dividend of $58,000 is scheduled to be paid in June. Tax payments of $26,600 are due in June and September. There is a scheduled capital outlay of $460,000 in September.

Ellis Electronics' ending cash balance in May is $28,000. The minimum desired cash balance is $23,000.

a. Prepare a schedule of monthly cash receipts for June through September.

Ellis Electronics

Cash Receipts Schedule

Apr. May. Jun. Jul. Aug. Sept.

Sales

Credit sales

Cash sales

Collections in months after sale

Collections second month after sale

Total cash receipts

b. Prepare the monthly cash payments for June through September

Ellis Electronics

Cash Payments Schedule

Aprl. May. Jun. Jul. Aug. Sept.

Purchases

Payments in the month after purchase

Payments second month after pruchase

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 $51,600. Excess cash (above $51,600) is used to buy marketable securities. Marketable securities are sold before borrowing funds in case of a cash shortfall (less than $23,000).

Ellis Electornics

Cash Budget

June Jul. Aug. Sept.

Cash receipts

Cash payments

Net cash flow

Beginning cash balance

Cumulative cash balance

Monthly borrowing or (repayment)

Cumulative loan balance

Marketable securities sold

Cumulative marketable securities

Ending cash balance