Reference no: EM132514305

Golden State Company has applied at a local bank for a short-term loan of $150,000 starting on October 1, 2019. The bank's loan officer has requested a cash budget from the company for the quarter ending December 31, 2019. The following information is needed to prepare the cash budget:

Sales                                                           $600,000
Purchases                                                       350,000
Salaries and wages to be paid                             125,000
Rent payments                                                  7,000
Supplies (payments for)                                        4,500
Insurance payments                                              1,500
Other cash payments                                              22,000

• A cash balance of $24,000 is planned for October 1 (beginning of quarter). Accounts receivable are expected to be $48,000 on October 1. All of these accounts will be collected in the quarter ending December 31. In general, Sales are collected as follows: 90% in the quarter of the sale and 10% in the quarter after the sale.

• Accounts Payable are planned to be $480,000 at October 1 and will be paid during the quarter ended December 31. All purchases are paid for in the quarter after the purchase.

Question a. Create a comprehensive cash budget for the quarter ending December 31, 2019. Assume that the $150,000 loan will be made on October 1 and will be repaid with interest at 10% on December 31.

(Don't forget the include the loan proceeds and the interest.)

Question b. If the company desires a minimum cash balance of $18,000, will the company be able to repay the loan as planned on December 31?