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: April (actual) May (actual) June (forecast) July (forecast) August (forecast) September (forecast) Sales $ 370,000 350,000 325,000 325,000 340,000 380,000 Purchases $ 155,000 145,000 145,000 205,000 225,000 220,000 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.

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: April (actual) May (actual) June (forecast) July (forecast) August (forecast) September (forecast) Sales $ 370,000 350,000 325,000 325,000 340,000 380,000 Purchases $ 155,000 145,000 145,000 205,000 225,000 220,000 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

100%

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:
April (actual)
May (actual)
June (forecast)
July (forecast)
August (forecast)
September (forecast)
Sales
$ 370,000
350,000
325,000
325,000
340,000
380,000
Purchases
$ 155,000
145,000
145,000
205,000
225,000
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.
Sales
Credit sales
Cash sales
One month after sale
Two months after sale
Total cash receipts
April
Archer Electronics
Cash Receipts Schedule
May
$
June
0
69
July
0 $
August
0 $
September
0

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