Question

During the last week of August, Oneida Company's owner approaches the bank for a $108,000 loan to be made on September 2 and repaid on November 30 with annual interest of 12%, for an interest cost of $3,240. The owner plans to increase the store's inventory by $60,000 during September and needs the loan to pay for inventory acquisitions. The bank's loan officer needs more information about Oneida's ability to repay the loan and asks the owner to forecast the store's November 30 cash position. On September 1, Oneida is expected to have a $4,000 cash balance, $130,900 of net accounts receivable, and $100,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash disbursements for the next three months follow. September $ 230,000 225,000 October $ 455,000 220,000 November $500,000 198,000 Budgeted Figures Sales Merchandise purchases Cash payments Payroll Rent Other cash expenses Repayment of bank loan Interest on the bank loan 19,700 12,000 34,300 22,100 12,000 29, 200 23,700 12,000 21,100 108,000 3,240 * Operations began in August; August sales were $170,000 and purchases were $115,000. The budgeted September merchandise purchases include the inventory increase. All sales are on account. The company predicts that 23% of credit sales is collected in the month of the sale, 47% in the month following the sale, 19% in the second month, 7% in the third, and the remainder is uncollectible. Applying these percents to the August credit sales, for example, shows that $79,900 of the $170,000 will be collected in September, $32,300 in October, and $11,900 in November. All merchandise is purchased on credit; 70% of the balance is paid in the month following a purchase, and the remaining 30% is paid in the second month. For example, of the $115,000 August purchases, $80,500 will be paid in September and $34,500 in October Required: Prepare a cash budget for September, October, and November. (Round your final answers to the nearest whole dollar.)

Answer 1

solution: calculations of cash receipts from sales collected in November 30. September October November Accounts Rec. g=a-b-c-d-e-f Total sales August uncollectible b=a*4% 39,100 credit sales from August September october November Total Uncollectible % =(1-0.23-0.47-0.19-0.07) 6,800 9,200 18,200 20,000 79,900 52,900 - 170,000 230,000 455,000 500,000 1,355,000 4.00% 32,300 108,100 104,650 11,900 43,700 213,850 115,000 384,450 16,100 118,300 365,000 499,400 39,100 132,800 245,050 Working for cash receipt: calculations of cash receipts from sales collected in September October November August credit sales from August September october November | 170000*0.23 | 170000*0.47 - 230000*0.23 170000*0.19 | 170000*0.07 230000*0.47 230000*0.19 455000*0.23 455000*0.47 - 500000*0.23 - -

calculations of cash payment for merchandise Paid in November 30. September October November Accounts Pay. c f=a-b-c-d-e Total Purchases August b 80,500 34,500 157,500 67,500 Purchase from: August September october November Total 115,000 225,000 220,000 198,000 758,000 154,000 66,000 198,000 264,000 80,500 192,000 221,500 working for payment for merchandise calculations of cash payment for merchandise Paid in September October November August 115000*0.3 Purchase from: August September october November 115000*0.7 225000*0.7 225000*0.3 220000*0.7

Sep Oct Nov 4,000 92,300 82,050 102,000 132,800 238,800 245,050 337,350 384,450 466,500 cash budget Beginning Cash Balance cash receipts Receipt from bank loan collection on account receivable Total Cash Available cash payments: payments for accounts payable payroll rent other cash expense repayment on bank loan Interest on bank loan 80,500 19,700 12,000 34,300 192,000 22,100 12,000 29,200 221,500 23,700 12,000 21,100 102,000 3,240 Total cash payments Ending Cash Balance 146,500 92,300 255,300 82,050 383,540 82,960