During the last week of March, Sony 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 $60,000 in April and needs the loan to pay for inventory acquisi- tions. The bank's loan officer needs more information about Sony Stereo's ability to repay the loan and asks the owner to forecast the store's June 30 cash position. On April 1, Sony Stereo is expected to have a $3,000 cash balance, $135,000 of accounts receivable, and $100,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash payments for the next three months follow. A Payroll Rent Budgeted Figures" 2 Sales 3 Merchandise purchases 4 Cash payments 5 6 7 8 9 April $220,000 210,000 16,000 6,000 64,000 C May $300,000 180,000 17,000 6,000 8,000 D June $380,000 220,000 18,000 6,000 7,000 80,000 2,400 Other cash expenses Repayment of bank loan Interest on bank loan *Operations began in March; March sales were $180,000 and purchases were $100,000. 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 follow- ing 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 $81,000 of the $180,000 will be collected in April, $36,000 in May, and $16,200 in June. All merchandise is purchased on credit; 80% of the balance is paid in the month following a purchase, and the remaining 20% is paid in the second month. For exam- ple, of the $100,000 March purchases, $80,000 will be paid in April and $20,000 in May. Required Prepare a cash budget for April, May, and June. Show supporting calculations as needed. Problem 20-6B" Merchandising: Preparation of cash budgets (for three periods) P4 Check Budgeted cash balance April $53.000

During the last week of March, Sony 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 $60,000 in April and needs the loan to pay for inventory acquisitions. The bank's loan officer needs more information about Sony Stereo's ability to repay the loan and asks the owner to forecast the store's June 30 eash position. On April 1, Sony Stereo is expected to have a $3,000 eash balance, $135,000 of accounts receivable, and $100,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash payments for the next three months follow. The budgeted April merchandise purchases include the imventory 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 follow: ing 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, strows that $81,000 of the $180,000 will be collected in April, $36,000 in May, and $16,200 in June, All merchandise is purchased on credir; 80% of the balance is paid in the month following a purchase, and the remaining 20% is paid in the second month. For example, of the $100,000 March purchases, $80,000 will be paid in April and $20,000 in May. Required Prepare a cash budget for April, May, and June. Show supporting calculations as needed. Problem 20-68 Merchandising: Preparation of cash budgets (for three periods) P4