Archer 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. Archer pays for 40 percent of its
purchases in the month after purchase and 60 percent two months after.
Labor 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.
Archer Electronics' ending cash balance in May is $20,000. The minimum
desired cash balance is $10,000. Prepare a schedule of monthly cash receipts,
monthly cash payments, and 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 $10,000).
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