4. Cash budget. 20 points. Tom Jones has approached his bank with a request for a $120,000, three-month loan to help build inventories in support of peak November sales. The loan officer has asked for a cash budget to help determine whether the loan should be made. Information is as follows: a) On September 30, the cash balance is $52,000. Accounts receivable is $303,000, of which $282,000 will be collected in October and $21,000 will be collected in November. Accounts Payable is $108,000. b) History shows that 25% of a month's sales are collected in the month of sale, 70% in the month following the sale, and 5% in the second month following the sale. c) Budgeted sales and expenses for the period are: Oct Nov Dec Sales Inventory purchases $ 400,000 240,000 $ 600,000 $ 500,000 Operating expenses 178,000 Equipment purchases 80,000 360,000 198,000 -0 300,000 156,000 Depreciation expense 20,000 20,000 -0 20,000 d) Inventory purchases are paid in full during the month following purchase. Operating expenses and equipment purchases are paid in the month incurred. e) In preparing the cash budget, assume that all $120,000 will be borrowed on October 1 and re-paid with interest on December 31; the interest rate on the loan is 8%. f) Recall that beginning cash + collections - disbursements = ending cash. Required: Prepare a cash budget for October, November and December. Then explain in complete sentences and using good grammar, whether the loan office should grant the loan to Mr. Jones. Give reasons for your conclusion. October November December Beginning cash