Problem 22-6AA 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 $100,000 loan to be made on September 2 and repaid on November 30 with annual interest of 12%, for an interest cost of $3,000. The owner plans to increase the store's inventory by $80,000 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 $5,000 cash balance, $159,100 of net accounts receivable, and $125,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash payments for the next three months follow. September $ 250,000 240,000 October $ 375,000 225,000 November $ 400,000 200,000 Budgeted Figures* Sales Merchandise purchases Cash payments Payroll Rent Other cash expenses Repayment of bank loan Interest on the bank loan 20,000 10,000 35,000 22,000 10,000 30,000 24,000 10,000 20,000 100,000 3,000 *Operations began in August; August sales were $215,000 and purchases were $125,000. The budgeted September merchandis purchases include the inventory increase. All sales are on accoun The company predic 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 August credit sales, for example, shows that $96,750 of the $215,000 will be collected in September, $43,000 in October, and $19,350 in November. 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 example, of the $125,000 August purchases, $100,000 will be paid in September and $25,000 in October. Required: Prepare a cash budget for September October, and November. vipi yuVEVY CELLE ry Calculation Cash Budget Prepare the calculation of cash receipts from sales and calculation of cash payments for merchandise. Calculation of cash receipts from sales --Collected in Uncollectible August September October November 30. Accounts Rec. Total Sales November Credit sales from: August September October $ 215,000 250,000 375,000 400,000 November Totals Calculation of cash payments for merchandise --Paid in- November 30. Total Purchases August September October November Accounts Pay. Purchases from: August September October $ 125,000 240,000 225,000 200,000 $ 790,000 November Totals VTCL L4uLVER Y LEILLERY Yvu. U LI LUV VLIVE. Calculation Cash Budget Prepare a cash budget for September, October, and November. ONEIDA COMPANY Cash Budget For September, October, and November September October $ 5,000 November Beginning cash balance Cash receipts es Total cash available Cash payments: Total cash payments Ending cash balance