Question

Archer Electronics Company’s actual sales and purchases for April and May are shown here along with forecast sales and purchases for June through September: Sales Purchases April (actual) $370,000 $155,000 May (actual) 350,000 145,000 June (forecast) 325,000 145,000 July (forecast) 325,000 205,000 August (forecast) 340,000 225,000 September (forecast) 380,000 220,000 The company makes 20 percent of its sales for cash and 80 percent on credit. Of the credit sales, 50 percent are collected in the month after the sale and 50 percent are collected two months later. Archer pays for 20 percent of its purchases in the month after purchase and 80 percent two months after. Labor expense equals 15 percent of the current month’s sales. Overhead expense equals $12,500 per month. Interest payments of $32,500 are due in June and September. A cash dividend of $52,500 is scheduled to be paid in June. Tax payments of $25,500 are due in June and September. There is a scheduled capital outlay of $350,000 in September. Archer Electronics’ ending cash balance in May is $22,500. The minimum desired cash balance is $10,500. a. Prepare a schedule of monthly cash receipts for June through September. b. Prepare a schedule of monthly cash payments for June through September. c. Prepare a complete monthly cash budget with borrowing and repayments for June through September. The maximum desired cash balance is $50,500. Excess cash (above $50,500) is used to buy marketable securities. Marketable securities are sold before borrowing funds in case of a cash shortfall (less than $10,500). (Negative amounts should be indicated by a minus sign. Assume the June beginning loan balance and beginning marketable security balance is $0.)

Answer 1

Archer Electronics
Cash Receipts Schedule
		April	May	June	July	Aug.	Sept.
	Sales	370000	350000	325000	325000	340000	380000
+	Cash Sales (20%)	74,000	70,000	65,000	65,000	68,000	76,000
	Credit Sales (80%)	296,000	280,000	260,000	260,000	272,000	304,000
+	Collections (month after sale) 50%		148,000	140,000	130,000	130,000	136,000
+	Collections (second month after sale) 50%			148,000	140,000	130,000	130,000
	Total Cash Receipts			353,000	335,000	328,000	342,000

Archer Electronics
Cash Payments Schedule
	April	May	June	July	Aug.	Sept.
Purchases	155,000.00	145,000.00	145,000.00	205,000.00	225,000.00	220,000.00
Payments (month after purchase—20%)		31,000.00	29,000.00	29,000.00	41,000.00	45,000.00
Payments (second month after purchase—80%)			124,000.00	116,000.00	116,000.00	164,000.00
Labor Expense (15% of sales)			48,750.00	48,750.00	51,000.00	57,000.00
Overhead			12,500.00	12,500.00	12,500.00	12,500.00
Interest Payments			32,500.00			32,500.00
Cash Dividend			52,500.00
Taxes			25,500.00			25,500.00
Capital Outlay						350,000.00
Total Cash Payments			324,750.00	206,250.00	220,500.00	686,500.00

Archer Electronics
Cash Budget
	June	July	August	September
Cash Receipts	353,000.00	335,000.00	328,000.00	342,000.00
Cash Payments	- 324,750.00	- 206,250.00	- 220,500.00	- 686,500.00
Net Cash Flow	28,250.00	128,750.00	107,500.00	- 344,500.00
Beginning Cash Balance	22,500.00	50,500.00	50,500.00	50,500.00
Cumulative Cash Balance	50,750.00	179,250.00	158,000.00	- 294,000.00
Monthly Borrowing or (Repayment)	--	--	--	68,000.00
Cumulative Loan Balance	--	--	--	68,000.00
Marketable Securities Purchased	250.00	128,750.00	107,500.00	--
(Sold)		--	--	- 236,500.00
Cumulative Marketable Securities	250.00	129,000.00	236,500.00	--
Ending Cash Balance	50,500.00	50,500.00	50,500.00	10,500.00