During the last week of August, Muir Company€™s owner approaches the bank for a $100,000 loan to be made on September 2 and repaid on November 30 with annual interest of 12%, for an interest cost of $3,000. The owner plans to increase the store€™s inventory by $80,000 during September and needs the loan to pay for inventory acquisitions. The bank€™s loan officer needs more information about Muir€™s ability to repay the loan and asks the owner to forecast the store€™s November 30 cash position. On September 1, Muir is expected to have a $4,000 cash balance, $152,000 of accounts receivable, and $115,000 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 24% of credit sales is collected in the month of the sale, 44% in the month following the sale, 21% in the second month, 8% in the third, and the remainder is uncollectible. Applying these percents to the August credit sales, for example, shows that $88,000 of the $200,000 will be collected in September, $42,000 in October, and $16,000 in November. All merchandise is purchased on credit; 85% of the balance is paid in the month following a purchase, and the remaining 15% is paid in the second month. For example, of the $115,000 August purchases, $97,750 will be paid in September and $17,250 in October.

Required
Prepare a cash budget for September, October, and November for Muir Company. Show supporting calculations asneeded.

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Fi E ow insert Fomat Tonls ta Window Hel Budgeted Figure s* September S350,000 275.000 October $400,000 185,000 November 2 Sales $425,000 180,000 hases... 4 Cash disbursements 5 Payroll 7 8 9 Rent Other cash expenses Repayment of bank loan Interest on the bank loan 25.000 12,000 38,000 30,000 12,000 29,000 35,000 12,000 24,500 100,000 3,000