Question

During the last week of August, Oneida Company’s owner approaches the bank for a $98,500 loan to be made on September 2 and repaid on November 30 with annual interest of 10%, for an interest cost of $2,463. 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, $121,600 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*	September		October		November
Sales	$	240,000	$	475,000	$	490,000
Merchandise purchases		225,000		225,000		194,000
Cash payments
Payroll		19,900		21,850		24,500
Rent		8,000		8,000		8,000
Other cash expenses		34,300		30,400		21,350
Repayment of bank loan						98,500
Interest on the bank loan						2,463

*Operations began in August; August sales were $160,000 and purchases were $100,000.

The budgeted September merchandise purchases include the inventory increase. All sales are on account. The company predicts that 24% of credit sales is collected in the month of the sale, 44% in the month following the sale, 21% in the second month, 8% in the third, and the remainder is uncollectible. Applying these percents to the August credit sales, for example, shows that $70,400 of the $160,000 will be collected in September, $33,600 in October, and $12,800 in November. All merchandise is purchased on credit; 40% of the balance is paid in the month following a purchase, and the remaining 60% is paid in the second month. For example, of the $100,000 August purchases, $40,000 will be paid in September and $60,000 in October.

Required:
Prepare a cash budget for September, October, and November. (Round your final answers to the nearest whole dollar.)
Calculation of cash receipts from sales --------------Collected in------ November 30. Accounts Rec. Total Sales Uncollectible August September October November Credit sales from: August September October November $ 160,000 240,000 475,000 490,000 $ 1,365,000 Totals Calculation of cash payments for merchandise ---------------Paid in--------- November 30. Total Purchases August September October November Accounts Pay. $ $ Purchases from: August September October November Totals 100,000 225,000 225,000 194,000 744,000 $ November ONEIDA COMPANY Cash Budget For September, October, and November September October Beginning cash balance $ 4,000 Cash receipts Collection on accounts receivable Receipts from bank loan Total cash available Cash payments: Payments on accounts payable Payroll Rent Other cash expenses Repayment on bank loan Interest on bank loan Total cash payments Ending cash balance

Answer 1

	Total Sales	Uncollectible	August	September	October	November	Accounts Receivable
Credit Sales from
August	$     160,000	$                4,800	$             38,400	$         70,400	$     33,600	$            12,800	$                  -
September	$     240,000	$                7,200		$         57,600	$   105,600	$            50,400	$        19,200
October	$     475,000	$              14,250			$   114,000	$          209,000	$      137,750
November	$     490,000	$              14,700				$          117,600	$      357,700
Totals	$ 1,365,000			$      128,000	$   253,200	$          389,800	$      514,650

	Total Purchases		August	September	October	November	Accounts Receivable
Purchases from
August	$     100,000			$         40,000	$     60,000		$                  -
September	$     225,000				$     90,000	$          135,000	$                  -
October	$     225,000					$            90,000	$      135,000
November	$     194,000						$      194,000
Totals	$     744,000			$         40,000	$   150,000	$          225,000	$      329,000

Cash Budget
	September	October	November
Beginning Cash Balance	$          4,000	$            128,300	$          171,250
Cash Receipts
Collection on accounts receivable	$     128,000	$            253,200	$          389,800
Receipt from bank loan	$        98,500
Total Cash Available	$     230,500	$            381,500	$          561,050
Cash Payments
Payments on accounts payable	$        40,000	$            150,000	$          225,000
Payroll	$        19,900	$              21,850	$             24,500
Rent	$          8,000	$                8,000	$               8,000
Other Cash expenses	$        34,300	$              30,400	$             21,350
Repayment of bank loan			$             98,500
Interest on bank loan			$               2,463
Total Cash payments	$     102,200	$            210,250	$          379,813
Ending Cash balance	$     128,300	$            171,250	$          181,237