Question

During the last week of August, Oneida Company's owner approaches the bank for a $105,000 loan to be made on September 2 and repaid on November 30 with annual interest of 12%, for an interest cost of $3150. 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, $154,000 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 Budgeted Figures* Sales Merchandise purchases Cash payments September October November 435,000 420,000 200,000 $ 230,000 230,000 225,000 Payroll Rent Other cash expenses Repayment of bank loan Interest on the bank loan 22,100 9,000 29,000 20,200 9,000 34,000 23,900 9,000 21,300 105,000 3,150 Operations began in August; August sales were $200,000 and purchases were $125,000 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 $94,000 of the $200,000 will be collected in September, $38,000 in October, and $14,000 in November. All merchandise is purchased on credit; 80% of the balance is paid in the month following a purchase, and the remaining 20% is paid in the second month. For example, of the $125,000 August purchases, $100,000 will be paid in September and $25,000 in October. Required Prepare a cash budget for September, October, and November. (Round your final answers to the nearest whole dollar.)

Answer 1

Calculation of cash receipts from sales			Collected in				November 30.
	Total sales	Uncollectible	August	September	October	November	Account Receivable
Credit sales from:
August	200000	8000	46000	94000	38000	14000
September	230000	9200		52900	108100	43700	16100
October	435000	17400			100050	204450	113100
November	420000	16800				96600	306600
Totals	1285000	51400	46000	146900	246150	358750	435800

Calculation of cash Payments for Merchandise			Paid In				November 30.
	Total Purchases		August	September	October	November	Accounts Payable
Credit sales from:
August	125000			100000	25000
September	230000				184000	46000
October	225000					180000	45000
November	200000						200000
Totals	780000			100000	209000	226000	245000

Cash Budget	September	October	November
Beginning Cash	4000	92700	69750
Cash Receipts
Cash receipts from sales	146900	246150	358750
Bank Loan	105000
Total Cash Available	255900	338850	428500
Cash Payments :
Merchandise Purchase	100000	209000	226000
Payroll	20200	22100	23900
Rent	9000	9000	9000
Other cash expense	34000	29000	21300
Repayment of Bank Loan			105000
Interest on loan			3150
Total Payments	163200	269100	388350
Ending Cash Balance	92700	69750	40150