During the last week of August, Apache Arts Company%u2019s owner approaches the bank for an $100,000 loan to be made on September 2 and repaid on November 30 with annual interest of 17%, for an interest cost of $4,250. The owner plans to increase the store%u2019s inventory by $60,000 during September and needs the loan to pay for inventory acquisitions. The bank%u2019s loan officer needs more information about Apache Arts%u2019 ability to repay the loan and asks the owner to forecast the store%u2019s November 30 cash position. On September 1, Apache Arts is expected to have a $4,000 cash balance, $145,000 of accounts receivable, and $100,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash disbursements for the next three months follow.
Budgeted Figures* September October November
Sales $ 280,000 $ 395,000 $ 460,000
Merchandise purchases 230,000 205,000 192,000
Cash disbursements
Payroll 20,300 22,000 24,200
Rent 11,000 11,000 11,000
Other cash expenses 34,700 30,600 20,650
Repayment of bank loan 100,000
Interest on the bank loan 4,250
*Operations began in August; August sales were $265,000 and purchases were $125,000.
The budgeted September merchandise purchases include the inventory increase. All sales are on account. The company predicts that 28% of credit sales is collected in the month of the sale, 43% in the month following the sale, 23% in the second month, 5% in the third, and the remainder is uncollectible. Applying these percents to the August credit sales, for example, shows that $113,950 of the $265,000 will be collected in September, $60,950 in October, and $13,250 in November. All merchandise is purchased on credit; 60% of the balance is paid in the month following a purchase, and the remaining 40% is paid in the second month. For example, of the $125,000 August purchases, $75,000 will be paid in September and $50,000 in October.
Required:
Prepare a cash budget for September, October, and November for Apache Arts Company. (Input all amounts as positive values. Leave no cells blank – be certain to enter “0” wherever required. Round your intermediate calculations and final answers to the nearest dollar amount. Omit the “$” sign in your response.)
APACHE ARTS COMPANY
Cash Budget
For September, October, and November
September October November
(Click to select) Office salaries Payments for merchandise Beginning cash balance Loan balance, end of month Preliminary cash balance $ $ $
Cash receipts
(Click to select) Payments on accounts payable Repayment on bank loan Collection on accounts receivable Interest on bank loan Payroll
(Click to select) Payments on accounts payable Payroll Repayment on bank loan Receipts from bank loan Interest on bank loan
Total cash available
Cash disbursements
(Click to select) Additional loan from bank Payments on accounts payable Collection on accounts payable Collection on accounts receivable Receipts from bank loan
(Click to select) Receipts from bank loan Collection on accounts payable Payroll Additional loan from bank Collection on accounts receivable
(Click to select) Collection on accounts payable Collection on accounts receivable Receipts from bank loan Additional loan from bank Rent
(Click to select) Receipts from bank loan Collection on accounts payable Collection on accounts receivable Other cash expenses Additional loan from bank
(Click to select) Additional loan from bank Receipts from bank loan Collection on accounts receivable Collection on accounts payable Repayment on bank loan
(Click to select) Interest on bank loan Additional loan from bank Collection on accounts payable Collection on accounts receivable Receipts from bank loan
Total cash disbursements
(Click to select) Repayment of loan to bank Beginning cash balance Additional loan from bank Preliminary cash balance Ending cash balance $ $ $
