During the last week of August, Apache Arts Companys owner approaches the bank for an $80,000 loan

During the last week of August, Apache Arts Company’s owner approaches the bank for an $80,000 loan to be made on September 2 and repaid on November 30 with annual interest of 12%, for an interest cost of $2,400. The owner plans to increase the store’s inventory by $60,000 during September and needs the loan to pay for inventory acquisitions. The bank’s loan officer needs more information about Apache Arts’ ability to repay the loan and asks the owner to forecast the store’s November 30 cash position. On September 1, Apache Arts is expected to have a $3,000 cash balance, $135,000 of accounts receivable, and $100,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash disbursements for the next three months follow.

The budgeted September merchandise purchases include the inventory increase. All sales are on account. The company predicts that 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 $81,000 of the $180,000 will be collected in September, $36,000 in October, and $16,200 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 $100,000 August purchases, $80,000 will be paid in September and $20,000 in October.
Required
Prepare a cash budget for September, October, and November for Apache Arts Company. Show supporting calculations asneeded.

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September Budgeted Figures Sales Merchandise purchaseS.... Cash disbursements October $300,000 180,000 November $220,000 210,000 $380,000 220,000 Payroll Other cash expenses Interest on the bank loan.... 16,000 6,000 64,000 17,000 6,000 8,000 18,000 6,000 7,000 80,000 2,400