During the last week of March, Harlan Stereo's owner approaches the bank for an $80,000 loan to be made on April 1 and repaid on June 30 with annual interest of 12%, for an interest cost of $2,400. The owner plans to increase the store's inventory by $120,000 in April and needs the loan to pay for inventory acquisitions. The bank's loan officer needs more information about Harlan Stereo's ability to repay the loan and asks the owner to forecast the store's June 30 cash position. On April 1, Harlan Stereo is expected to have a $6,000 cash balance, $270,000 of accounts receivable, and $200,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash disbursements for the next three months follow. Budgeted Figures* April Sales $460,000 May June $625,000 $755,000 Merchandise purchases $445,000 $375,000 $456,000 Cash disbursements Payroll $32,000 $34,000 $36,000 Rent $12,000 $12,000 $12,000 Other cash expenses $132,000 $18,000 $15,500 Repayment of bank loan $80,000 Interest on the bank loan $2,400 *Operations began in March; March sales were $360,000 and purchases were $200,000. The budgeted April merchandise purchases include the inventory increase. All sales are on account. The company predicts that 25% of credit sales is collected in the month of the sale, 45% in the month following the sale, 20% in the second month, 9% in the third, and the remainder is uncollectible. Applying these percents to the March credit sales, for example, shows that $162,000 of the $360,000 will be collected in April, $72,000 in May, and $32,400 in June. All Merchandise is purchased on credit; 80% of the balance is paid in the month following a purchase and remaining 20% is paid in the second month. For example, of the $200,000 March purchases, $160,000 will be paid in April and $40,000 in May. Required Prepare a cash budget for April, May, and June for Harlan Stereo. Show supporting calculations as needed. Write a quick explanation as to why the bank should grant the loan. (2 septances)