Question

During the last week of August, Apache Arts Company’s owner approaches the bank for an $104,500 loan to be made on September 2 and repaid on November 30 with annual interest of 16%, for an interest cost of $4,180. 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 Apache Arts’ ability to repay the loan and asks the owner to forecast the store’s November 30 cash position. On September 1, Apache Arts is expected to have a $4,000 cash balance, $131,400 of 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*	September		October		November
Sales	$	250,000	$	465,000	$	500,000
Merchandise purchases		230,000		210,000		192,000
Cash disbursements
Payroll		20,000		22,000		24,900
Rent		12,000		12,000		12,000
Other cash expenses		34,400		30,400		20,150
Repayment of bank loan						104,500
Interest on the bank loan						4,180

*Operations began in August; August sales were $180,000 and purchases were $120,000.

The budgeted September merchandise purchases include the inventory increase. All sales are on account. The company predicts that 27% of credit sales is collected in the month of the sale, 44% in the month following the sale, 22% in the second month, 6% in the third, and the remainder is uncollectible. Applying these percents to the August credit sales, for example, shows that $79,200 of the $180,000 will be collected in September, $39,600 in October, and $10,800 in November. All merchandise is purchased on credit; 50% of the balance is paid in the month following a purchase, and the remaining 50% is paid in the second month. For example, of the $120,000 August purchases, $60,000 will be paid in September and $60,000 in October.

Required:

Prepare a cash budget for September, October, and November for Apache Arts Company. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

APACHE ARTS COMPANY Cash Budget For September, October, and November
	September	October	November
(Click to select)Loan balance, end of monthPreliminary cash balanceBeginning cash balancePayments for merchandiseOffice salaries	$	$	$
Cash receipts
(Click to select)Collection on accounts receivableRepayment on bank loanInterest on bank loanPayrollPayments on accounts payable
(Click to select)Interest on bank loanPayments on accounts payablePayrollRepayment on bank loanReceipts from bank loan
Total cash available
Cash disbursements
(Click to select)Payments on accounts payableReceipts from bank loanCollection on accounts receivableAdditional loan from bankCollection on accounts payable
(Click to select)Additional loan from bankReceipts from bank loanCollection on accounts payablePayrollCollection on accounts receivable
(Click to select)RentAdditional loan from bankReceipts from bank loanCollection on accounts receivableCollection on accounts payable
(Click to select)Collection on accounts receivableReceipts from bank loanOther cash expensesCollection on accounts payableAdditional loan from bank
(Click to select)Repayment on bank loanCollection on accounts payableAdditional loan from bankReceipts from bank loanCollection on accounts receivable
(Click to select)Receipts from bank loanInterest on bank loanCollection on accounts payableCollection on accounts receivableAdditional loan from bank
Total cash disbursements
(Click to select)Additional loan from bankPreliminary cash balanceEnding cash balanceBeginning cash balanceRepayment of loan to bank	$	$	$

Answer 1

Collection from Accounts Receivables:

	September	October	November
27% in the month of Sale	67,500	125,550	135,000
44% in following month	79,200	110,000	204,600
22% in Second Month		39,600	55,000
6% in third month			10,800
Total Collections	146,700	275,150	405,400

Aug Sales = 131,400/73% = 180,000

Cash Disbursements:

	September	October	November
50% in the following month	60,000	115,000	105,000
50% in second month		60,000	115,000
Total Disbursements	60,000	175,000	220,000

	September	October	November
Beginning Cash Balance	4,000	128,800	164,550
Cash receipts
Collection on accounts receivable	146,700	275,150	405,400
Receipts from bank loan	104,500		569,950
Total cash available	255,200	403,950
Cash disbursements
Payments on accounts payable	60,000	175,000	220,000
Payroll	20,000	22,000	24,900
Rent	12,000	12,000	12,000
Other cash expenses	34,400	30,400	20,150
Repayment on bank loan			104,500
Interest on bank loan			4,180
Total cash disbursements	126,400	239,400	385,730
Ending cash balance	128,800	164,550	184,220