Oneida Company: Preparation of cash budgets

Preparation of cash budgets (for three periods)

See pdf attached

Question 2: (10 points)
Problem 7-2A: Preparation of cash budgets (for three periods) L.O. C3, P2
During the last week of August, Oneida Company's owner approaches the bank for an $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 Oneida's ability to repay the loan and
asks the owner to forecast the store's November 30 cash position. On September 1, Oneida is expected to have a
$5,000 cash balance, $148,000 of accounts receivable, and $125,000 of accounts payable. Its budgeted sales,
merchandise purchases, and various cash disbursements for the next three months follow:

Budgeted Figures* September October November
Sales $250,000 $375,000 $400,000
Merchandise purchases 240,000 225,000 200,000
Cash disbursements
Payroll 20,000 22,000 24,000
Rent 10,000 10,000 10,000
Other cash expenses 35,000 30,000 20,000
Repayment of bank loan 100,000
Interest on the bank loan 3,000

* Operations began in August; August sales were $215,000 and purchases were $125,000.
The budgeted September merchandise purchases include the inventory increase. All sales are on account.
Company experience is 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 $96,750 of the $215,000 will be collected in September, $43,000
in October, and $19,350 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 $125,000
August purchases, $100,000 will be paid in September and $25,000 in October.

Required:
Prepare a cash budget for September, October, and November for Oneida Company. (Omit the "$" sign in your
response. Leave no cells blank - be certain to enter "0" wherever required.)
ONEIDA COMPANY
Cash Budget
For September, October, and November
September October November
Beginning balance $ $ $
Cash receipts
Receipts from bank loan
Total cash available
Cash disbursements
Payroll
Rent
Other expenses
Repayment on bank loan
Interest on bank loan
Total cash disbursements
Ending cash balance $ $ $