During the last week of August, Oneida Companys owner approaches the bank for an $107,500 loan to be made on September 2 and repaid on November 30 with annual interest of 17%, for an interest cost of $4,569. The owner plans to increase the stores inventory by $60,000 during September and needs the loan to pay for inventory acquisitions. The banks loan officer needs more information about Oneidas ability to repay the loan and asks the owner to forecast the stores November 30 cash position. On September 1, Oneida is expected to have a $4,500 cash balance, $138,700 of accounts receivable, and $100,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash disbursements for the next three months follow.

Budgeted Figures*SeptemberOctoberNovemberSales$230,000$425,000$480,000Merchandise purchases225,000205,000202,000Cash disbursementsPayroll19,70022,15023,600Rent12,00012,00012,000Other cash expenses34,10031,40020,850Repayment of bank loan107,500Interest on the bank loan4,569

*Operations began in August; August sales were $190,000 and purchases were $110,000.

The budgeted September merchandise purchases include the inventory increase. All sales are on account. The company predicts that 27% of credit sales is collected in the month of the sale, 44% in the month following the sale, 22% in the second month, 6% in the third, and the remainder is uncollectible. Applying these percents to the August credit sales, for example, shows that $83,600 of the $190,000 will be collected in September, $41,800 in October, and $11,400 in November. All merchandise is purchased on credit; 90% of the balance is paid in the month following a purchase, and the remaining 10% is paid in the second month. For example, of the $110,000 August purchases, $99,000 will be paid in September and $11,000 in October.