The president of the retailer Pet Products has just approached the company's bank with a

request for a $$30,000,90-$day loan. The purpose of the loan is to assist the company in

acquiring inventories. Because the company has had some difficulty in paying off its loans in the

past, the loan officer has asked for a cash budget to help determine whether the loan should be

made. The following information is available for the months October through December, during

which the loan will be used:

$$ On October $1,$ the start of the loan period, the cash balance will be $$25,000.$ Accounts

receivable on October $1$ will total $$150,000,$ of which $$120,000$ will be collected during

October and $$26,000$ will be collected during November. The remainder will be

uncollectible.

$$ Experience shows that $25\%$ of a month's sales are collected in the month of sale, $65\%$ in the

month following sale, and $9\%$ in the second month following sale. The other $1\%$ is bad debts

that are never collected. Budgeted sales and expenses for the three$-$month period follow:

October November December

Sales $($all on account$)$ $$300,000$ $$410,000$ $$350,000$

Merchandise purchases $210,000180,000160,000$

Payroll $25,00042,00030,000$

Lease payments $12,00012,00012,000$

Advertising $8,0008,0008,000$

Equipment purchases $-10,00060,000$

Depreciation $15,00015,00018,000$

$$ Merchandise purchases are paid in full during the month following purchase. Accounts

payable for merchandise purchases during Spetember, which will be paid in October, total

$$160,000.$

$$ In preparing the cash budget, assume that the $$30,000$ loan will be made in October and

repaid at the end of December. Interest on the loan will total $$1,200$ and be paid along with

the loan repayment at the end of December.

Required:

Prepare an Excel$-$based analysis that addresses the items below. The analysis$/$model must use

formulas for all calculations and will allow $$what$-$if$$ scenarios for differing cash collections

assumptions. Each analysis should have a separate tab$/$sheet in the analysis.

$1.$ Calculate the expected cash collections for October, November, and December, and for the

three months in total.

$2.$ Prepare a cash budget by month and in total for the $3-$month period.

$3.$ Prepare a revised cash collections schedule and cash budget by developing revised cash

collections assumptions $($i$.$e$.,$ changing the $25\%,65\%,$ and $9\%$ timing estimates$).$ The best

practice will be to copy your sheets from requirements $1$ and $2$ and changing the

percentage assumptions. If your model is formula$-$driven, this will just take a couple of

minutes. I will grade key aspects of this analysis by changing the assumptions to make sure

your schedules update to reflect the changes.