Stalk & Case Inc., wants a projection of cash receipts and cash payments for the month of November. On November 28, a note will be payable in the amount of 2.402.250,- including interest. The cash balance on November 1 is 2.080,200,- Accounts payable to merchandise creditors at the end of October were 2,112,000. The company's experience indicates that 70 percent of sales will be collected during the month of sale, 25 percent in the month following the sale, and 3 percent in the second month following the sale; 2 percent will be uncollectible. The company sells various products at an average price of 52 per unit. Selected sales figures are as follows:

Septemberactual50.000 units

October actual70.000 units

Novemberforecast85.000 units

Decemberforecast60.000 units

Total forecast for year-end:900.000 units

Because purchases are payable within 15 days, approximately 50 percent of the purchases in a given month are paid in the following month. The average cost of units purchased is 36 per unit. Inventories at the end of each month are maintained at a level of 2,000 units plus 10 percent of the number of units that will be sold in the following month. The inventory on October 1 amounted to 9,000 units. Budgeted operating expenses for November are 1357,000. Of this amount, 350,000 is considered fixed (including depreciation of 150,000). All operating expenses, other than depreciation, are paid in the month in which they are incurred. The company expects to sell fully depreciated equipment in November for 19,000 cash.

Instructions

Prepare cash budget for the month of November, supported by schedules of cash collections on accounts receivable and cash payments for purchases of merchandise and let the CEO know if the note payable due Nov, 28^th can be paid back in full or not. What happens if Stalk & Case can't sale the used equipment?

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