Question

Coronado Instruments, a rapidly expanding electronic parts distributor, is in the process of formulating plans for next year. Bill Stockton, the firm’s director of marketing, has completed his sales forecast and is confident that sales estimates will be met or exceeded. The following sales figures show the growth expected and will provide the planning basis for other corporate departments.

Month		Forecasted Sales		Month		Forecasted Sales
January		$ 1,940,000		July		$ 3,140,000
February		2,140,000		August		3,140,000
March		1,940,000		September		3,340,000
April		2,340,000		October		3,340,000
May		2,640,000		November		3,140,000
June		2,940,000		December		3,540,000

Samantha Carlson, assistant controller, has been given the responsibility for formulating the cash flow projection, a critical element during a period of rapid expansion. The following information will be used in preparing the cash analysis.

1.		Coronado has experienced an excellent record in accounts receivable collection and expects this trend to continue. 60% of billings are collected in the month after the sale and 40% in the second month after the sale. Uncollectibles are nominal and can be ignored in the analysis.
2.		The purchase of electronic parts is Coronado’s largest expenditure: the cost of these items is equal to 50% of sales. 60% of the parts are received by Coronado one month prior to sale and 40% are received during the month of sale.
3.		Historically, 80% of accounts payable have been cleared by Coronado one month after receipt of purchased parts and the remaining 20% have been cleared two months after receipt.
4.		Hourly wages, including fringe benefits, are a function of sales volume and are equal to 20% of the current month’s sales. These wages are paid in the month incurred.
5.		General and administrative expenses are projected to be $ 2,904,000 for the next period. These include $ 468,000 in salaries, $ 636,000 in product promotions, $ 204,000 in property taxes, $ 444,000 for insurance, $ 384,000 in utilities, and $ 768,000 in depreciation. All expenses except property taxes are incurred uniformly throughout the year, and property taxes are paid in four equal installments in the last month of each calendar quarter.
6.		Coronado makes income tax payments in the first month of each quarter based on the income for the prior quarter. Coronado is subject to an effective income tax rate of 40%. Coronado’s pretax income for the first quarter of the next year is projected to be $ 630,000.
7.		Coronado has a corporate policy of maintaining an end-of-month cash balance of $ 100,000. Cash is invested or borrowed monthly, as necessary to maintain this balance.

Questions:

Prepare a table with the cash receipts and disbursements budget for Coronado Instruments by month for the second quarter. Be sure that all receipts, disbursements, and borrowing/investing are presented on a monthly basis. Ignore the interest expense and/or income associated with borrowing/investing. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Cash Receipts and Disbursements Budget
		April		May		June
Receipts		$		$		$
Disbursements
Wages and fringe benefitsProperty taxesElectronic partsIncome taxesGeneral and administration
Electronic partsIncome taxesProperty taxesGeneral and administrationWages and fringe benefits
Electronic partsWages and fringe benefitsGeneral and administrationIncome taxesProperty taxes
Electronic partsGeneral and administrationIncome taxesProperty taxesWages and fringe benefits
Income taxesGeneral and administrationElectronic partsWages and fringe benefitsProperty taxes
Total Disbursements
Excess Receipts (Disbursements)		$		$		$

Short-Term Financing Budget
		April		May		June
Beginning cash balanceBorrowing decreaseExcess receiptsInvestment decreaseInvestment increaseExcess disbursementsEnding cash balanceBorrowing increase		$		$		$
Excess receiptsBeginning cash balanceInvestment increaseEnding cash balanceExcess disbursementsBorrowing decreaseInvestment decreaseBorrowing increase
Investment decreaseBeginning cash balanceInvestment increaseBorrowing increaseExcess receiptsBorrowing decreaseEnding cash balanceExcess disbursements
Borrowing increaseExcess receiptsExcess disbursementsBorrowing decreaseInvestment decreaseEnding cash balanceInvestment increaseBeginning cash balance
Investment increaseEnding cash balanceBeginning cash balanceBorrowing decreaseInvestment decreaseExcess disbursementsBorrowing increaseExcess receipts		$		$		$