During the last week of March, Harlan Stereo€™s owner approaches the bank for an $80,000 loan to be made on April 1 and repaid on June 30 with annual interest of 12%, for an interest cost of $2,400. The owner plans to increase the store€™s inventory by $120,000 in April and needs the loan to pay for inventory acquisitions. The bank€™s loan officer needs more information about Harlan Stereo€™s ability to repay the loan and asks the owner to forecast the store€™s June 30 cash position. On April 1, Harlan Stereo is expected to have a $6,000 cash balance, $270,000 of accounts receivable, and $200,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash disbursements for the next three months follow.

The budgeted April merchandise purchases include the inventory increase. All sales are on account. The company predicts that 25% of credit sales is collected in the month of the sale, 45% in the month following the sale, 20% in the second month, 9% in the third, and the remainder is uncollectible. Applying these percents to the March credit sales, for example, shows that $162,000 of the $360,000 will be collected in April, $72,000 in May, and $32,400 in June. 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 $200,000 March purchases, $160,000 will be paid in April and $40,000 in May.

Required
Prepare a cash budget for April, May, and June for Harlan Stereo. Show supporting calculations asneeded.

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Budgeted Figures* April $440,000 420,000 May June 2 Saies 3 Merchandise purchases... 4Cash disbursements 6 $760,000 440,000 360,000 Payrol! Rent. Other cash expenses 32,000 12,000 128,000 34,000 12,000 16,000 36,000 12,000 14,000 80.000 2.400 8 Repayment of bank loan Interest on the bank loan..