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Item 3

Problem 4-30

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)	$490,000	$147,000
May (actual)	470,000	137,000
June (forecast)	445,000	137,000
July (forecast)	445,000	197,000
August (forecast)	460,000	217,000
September (forecast)	500,000	187,000

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.

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

Ellis Electronics Cash Receipts Schedule

April

May

June

July

August

September

Sales

$

$

$

$

$

$

Credit sales

Cash sales

Collections in month 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

April

May

June

July

August

September

Purchases

$

$

$

$

$

$

Payments in the month after purchase

Payments second month after purchase

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 $51,700. Excess cash (above $51,700) is used to buy marketable securities. Marketable securities are sold before borrowing funds in case of a cash shortfall (less than $23,500). (Omit $ sign in your response. Do not leave any empty spaces; input a 0 wherever it is required. Negative answers and amounts to be deducted should be indicated by a minus sign.)

Ellis Electronics Cash Budget
	June	July	August	September
Cash receipts	$	$	$	$
Cash payments
Net cash flow
Beginning cash balance
Cumulative cash balance
Monthly borrowing or (repayment)
Cumulative loan balance
Marketable securities purchased
Marketable securities sold
Cumulative marketable securities
Ending cash balance	$	$	$	$