Cash Budget

Friendly Freddie's is 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 to ensure that the chain is able to replenish stock adequately and meet payment schedules to 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 of $8,240 be kept in the chain's checking account at the end of each month. When the balance goes below $8,240, the bank automatically extends the line of credit in multiples of $1,000 so that the checking account balance is at least $8,240 at month-end.

Friendly Freddie's attempts to borrow as little as 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 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	$	8,880
Estimated cash sales:
October		13,660
November		29,160
December		43,600
Sales on account:
July (actual)		129,800
August (actual)		103,400
September (actual)		128,500
October (estimated)		134,500
November (estimated)		141,100
December (estimated)		188,800

Projected cash collection of sales on account is estimated to be 70 percent in the month following the sale, 20 percent in the second month following the sale, and 7 percent in the third month following the sale. The 3 percent beyond the third month following the sale is determined to be uncollectible. In addition, the chain is scheduled to receive $13,100 cash on a note receivable in October.

All inventory purchases are made on account as 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)	$	120,400
October (estimated)		112,100
November (estimated)		127,600
December (estimated)		94,700

Cash disbursements for inventory are made in the month following purchase using an average cash discount of 3 percent for timely payment. Monthly cash disbursements for operating expenses during October, November, and December are estimated to be $38,500, $41,000, and $46,500, 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. If an amount is zero, enter "0".

Friendly Freddie's Cash Budget October through December

	October	November	December
Beginning cash balance	$fill in the blank 1	$fill in the blank 2	$fill in the blank 3
Receipts:
Cash sales	fill in the blank 4	fill in the blank 5	fill in the blank 6
Collections of sales on account	fill in the blank 7	fill in the blank 8	fill in the blank 9
Note receivable repayment	fill in the blank 10
Total cash available	$fill in the blank 11	$fill in the blank 12	$fill in the blank 13
Disbursements:
Payment of inventory purchases	$fill in the blank 14	$fill in the blank 15	$fill in the blank 16
Operating expenses	fill in the blank 17	fill in the blank 18	fill in the blank 19
Loan repayment		fill in the blank 20	fill in the blank 21
Interest		fill in the blank 22	fill in the blank 23
Total disbursements	$fill in the blank 24	$fill in the blank 25	$fill in the blank 26
Cash balance	$fill in the blank 27	$fill in the blank 28	$fill in the blank 29
Bank loan	fill in the blank 30
Adjusted cash balance	$fill in the blank 31	$fill in the blank 32	$fill in the blank 33