Cash Budget Friendly Freddie's is an independently owned major appliance and electronics discount chain with seven stores located in a Midwestern metropolitan area. Rapid expansion has created the need for careful planning of cash requirements to ensure that the chain is able to replenish stock adequately and meet payment schedules to creditors. Fred Ferguson, founder of the chain, has established a banking relationship that provides a $200,000 line of credit to Friendly Freddie's. The bank requires that a minimum balance of $8,260 be kept in the chain's checking account at the end of each month. When the balance goes below $8,260, the bank automatically extends the line of credit in multiples of $1,000 so that the checking account balance is at least $8,260 at month-end. Friendly Freddie's attempts to borrow as little as possible and repays the loans quickly in multiples of $1,000 plus 2 percent monthly interest on the entire loan balance. Interest payments and any principal payments are paid at the end of the month following the loan. The chain currently has no outstanding loans. The following cash receipts and disbursements data apply to the fourth quarter of the current calendar year. Estimated beginning cash balance $ 9,030 Estimated cash sales: October 13,830 November 29,290 December 43,600 Sales on account: July (actual) 130,600 August (actual) 103,600 September (actual) 127,800 October (estimated) 134,300 November (estimated) 142,400 December (estimated) 188,900 Projected cash collection of sales on account is estimated to be 68 percent in the month following the sale, 22 percent in the second month following the sale, and 8 percent in the third month following the sale. The 2 percent beyond the third month following the sale is determined to be uncollectible. In addition, the chain is scheduled to receive $12,900 cash on a note receivable in October. All inventory purchases are made on account as the chain has excellent credit with all vendors because of a strong payment history. The following information regarding inventory purchases is available. Inventory Purchases $ 120,200 111,800 September (actual) October (estimated) November (estimated) December (estimated) 127,900 95,700 Cash disbursements for inventory are made in the month following purchase using an average cash discount of 3 percent for timely payment. Monthly cash disbursements for operating expenses during October, November, and December are estimated to be $37,900, $41,300, and $46,200, respectively. Required: Required: Prepare Friendly Freddie's cash budget for the months of October, November, and December showing all receipts, disbursements, and credit line activity, where applicable. (CMA adapted). Enter all cash disbursements as positive values. If a cash balance is negative, enter the amount as a negative value. If an amount is zero, enter "0". Friendly Freddie's Cash Budget October through December October November December 9,030 Beginning cash balance Receipts: Cash sales Collections of sales on account $ Note receivable repayment Total cash available Disbursements: Payment of inventory purchases $ Operating expenses 100 Loan repayment Interest October through December October November December 9,030 Beginning cash balance Receipts: Cash sales Collections of sales on account Note receivable repayment $ Total cash available Disbursements: Payment of inventory purchases $ Operating expenses $ Loan repayment Interest Total disbursements Cash balance $ podu Bank loan Adjusted cash balance
