Case.No.5.

You are a loan officer for HSBC Bank Ltd. The senior loan officer submits to you the following selected financial information as of September 30, 2020, for Union Corporation, which has filed a loan application:

Current Assets:
Cash	$20,000
Accounts Receivable	30,000
Inventory	1,21,200
Plant and equipment, net	2,00,000
Total liabilities	0
Actual sales
September, 2020	$80,000
Forecasted sales
October, Year 2020	$96,000
November, Year 2020	1,20,000
December, 2020	1,60,000
January, Year 2021	72,000

Sales are 85% cash and 15% on account. Receivables are collected in full in the month following the sale. For example, the accounts receivable balance of $20,000 on September 30, year 2020, equals 25% of the sales from September, of which all $20,000 is paid in October. Gross profit average 30% of sales before purchase discounts. Therefore, the gross invoice cost of goods sold is 70% of sales. Union corporation carries $60,000 of inventory plus additional inventory sufficient to provide for the anticipated sales of the following month. Purchase terms are 2/10, n/30. Since purchase are made early in each month and all discounts are taken, payments are consistently made in the month of purchase. Salaries and wages average 10% of sales, rent averages 5% of sales and all other expenses (except depreciation) averages 4% of sales. These expenses are paid in cash when incurred. Depreciation expense is $1,500 per month, computed on straight line basis. Equipment expenditures are forecasted at $1,200 in October and $800 in November. Depreciation on these new expenditures is not recorded until year 2021. Union Corporation maintains a minimum cash balance of $1,60,000. Any borrowing is made at the beginning of the month and any repayments are made at the end of the month, both in multiples of $1,000 (excluding interest). In is paid when the principal is repaid, equal to a rate of 10% per year.

Required:

• The senior loan officer requests you prepare the following schedules for the months of October, November and December, and for the total three months (quarter) ending in December of Year 2020:
• Estimated total cash receipts.
• Estimated cash disbursements for purchases (purchases are 70% of sales for the following month).
• Estimated cash disbursements for operating expenses.
• Estimated total cash disbursements.
• Estimated net cash receipts and disbursements.
• Estimated financing required
• For the three months (quarter) ending December of year 2020, prepare a:
• Forecasted income statement (ignore taxes).
• Forecasted balance sheet.