Cash Budget Friendly Freddie's an independently owned major appliance and electronics discount chain with seven stores located in a Midwestern metropolitan area. Rapid expansion has created the need for careful planning of cash requirements ensure that the chain is able t replenish stock adequately and meet payment schedules o creditors. Fred Ferguson, founder of the chain, has established a banking relationship that provides a $200,000 line of credit to Friendly Freddie's. The bank requires that a minimum balance f $8,200 be kept in the chain's checking account at the end of each month. When the balance goes below $8,200, the bank automatically extends the line of credit in multiples of $1,000 so that the checking account balance is at least $8,200 at month-end. s possible and repays the loans quickly in multiples of $1,000 plus 2 percent monthly interest on the entire loan balance. Interest payments and any principal payments are Friendly Freddie's attempts to borrow as little paid at the end of the month following the loan. The chain currently has no outstanding loans. The following cash receipts and disbursements data apply to the fourth quarter of the current calendar year. Estimated beginning cash balance 8,800 Estimated cash sales: October 14.000 November 29,000 44,000 December Sales on account: July (actual) 130,000 August (actual) 104,000 September (actual) 128.000 October (estimated) 135.000 November (estimated) 142,000 December (estimated) 188.000 Projected cash collection of sales on account is estimated to be 0 percent in the month following the sale, 20 percent in the second month following the sale, and 6 percent the third month following the sale. The 4 percent beyond the third month following the sale is determined to be uncollectible. In addition, the chain is scheduled t receive $13,000 cash e a note receivable in October All inventory purchases are made on account s the chain has excellent credit with all vendors because of a strong payment history. The following information regarding inventory purchases is available. Inventory Purchases September (actual) $120,000 October (estimated) 112.000 November (estimated) 128,000 December (estimated) 95.000 Cash disbursements for inventory are made in the month fol lowing purchase using an average cash discount 3 percent for timely payment. Monthly cash disbursements for operating expenses during October, November, and December are estimated to be $38,000, $41,000, and $46,000, respectively. Required: Prepare Friendly Freddie's cash budget for the months of October, November, and December showing all receipts, disbursements, and credit line activity, where applicable. (CMA adapted). Enter all cash disbursements as positive values. If a cash balance is negative, enter the amount as a negative value. Friendly Freddie's Cash Budget October through December November December October 9,120 Beginning cash balance 8,800 8,600 Receipts: Cash sales 14.000 29.000 44,000 Collections of sales on account 163,940X 154,00 X Note recelvable repayment Total cash available Disbursements: Pavment of inventory purchases Operating expenses Loan repayment 9,000 X 4,000 Prepare Friendly Freddie's cash budget for the months of October, November, and December showing all receipts, disbursements, and credit line activity, where applicable. (CMA adapted). Enter all cash disbursements as positive values. If a cash balance is negative, enter the amount a negative value. Friendly Freddie's Cash Budget October through December October November December d 8,600 9.120 8,800 Beginning cash balance Receipts: Cash sales 44,000 14,000 29,000 Collections of sales on account 163,940 X X 154.0U0 Note recelvable repayment Total cash available Disbursements: Payment of inventory purchases Operating expenses Loan repayment 9,000X 4,000 Interest 80 V V 180 Total disbursements 5,120 X 12,960 400 Cash balance Bank loan 8.600 9,120 12,960 Adiusted cash balance
