Problem 20-6AA Merchandising: Preparation of cash budgets (for three periods) LO P4 During the last week of August, Oneida Company's owner approaches the bank for a $104,000 loan to be made on September 2 and repaid on November 30 with annual interest of 11%, for an interest cost of $2,860. The owner plans to increase the store's inventory by $60,000 during September and needs the loan to pay for inventory acquisitions. The bank's loan officer needs more information about Oneida's ability to repay the loan and asks the owner to forecast the store's November 30 cash position. On September 1, Oneida is expected to have a $4,500 cash balance, $124,100 of net accounts receivable, and $100,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash payments for the next three months follow. September $ 220,000 230,000 October $ 415,000 210,000 November $ 500,000 195,000 Budgeted Figures Sales Merchandise purchases Cash payments Payroll Rent Other cash expenses Repayment of bank loan Interest on the bank loan 19,500 12,000 34,100 22,000 12,000 31,600 24,200 12,000 20,750 104,000 2,860 Operations began in August August sales were $170,000 and purchases were $105,000 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 $74,800 of the $170,000 will be collected in September. $37,400 in October, and $10,200 in November. All merchandise is purchased on credit: 40% of the balance is paid in the month following a purchase, and the remaining 60% is paid in the second month. For example of the $105,000 August purchases, $42,000 will be paid in September and $63,000 in October. Required: Prepare a cash budget for September October, and November Calculation Cash Budget Prepare the calculation of cash receipts from sales and calculation of cash payments for merchandise. Calculation of cash receipts from sales November .-Collected in- 30. Total Sales Accounts Uncollectible August September October November Rec. Credit sales from: August $ 170,000 $ 1,700 $ 45,900 $ 74,800 $ 37,400 $ 10,200 $ 0 September 220,000 2,200 59,400 96,800 48,400 13,200 October 415,000 4,150 112,050 182,600 116,200 November 500,000 5,000 0 135,000 360,000 Totals $ 1,305,000 45,900 $ 134,200 $ 246,250 $ 376,200 $ 489,400 0 0 0 0 0 November Calculation of cash payments for merchandise ..-Paid in........... August September October 30. Total Purchases November Accounts Pay $ $ S 0 0 0 Purchases from: August September October 42,000 0 105,000 230,000 210,000 195,000 740,000 63,000 92,000 0 0 138,000 84,000 0 0 November 0 0 0 126,000 78,000 $ 204,000 117,000 117,000 Totals $ 42,000 $ 155,000 $ 222,000 Prepare a cash budget for September, October, and November. (Round your final a ONEIDA COMPANY Cash Budget For September, October, and November September October November Beginning cash balance $ 4,500 $ 22,100 X $ (19,250) Cash receipts Cash sales 134,200 246,250 376,200 Receipts from bank loan 104,000 0 0 Total cash available 242,700 268,350 Cash payments: Payments on accounts payable 155,000 222,000 204,000 Payroll 19,500 22,000 24,200 Rent 12,000 12,000 12,000 Other cash expenses 34,100 31,600 20,750 Repayment on bank loan 0 0 104,000 Interest on bank loan 0 0 2,860 Total cash payments Ending cash balance 220,600 287,600 22,100 X $ (19,250) $ 367,810 (10,860) $ $