James Buchanan Orthotics and Prosthetics is planning to requesta line of credit from its bank. The company has produced salesestimates, and these appear in the worksheet below. Collectionestimates are as follows: 10 percent within the month of sale, 75percent in the month following the sale, and 15 percent in thesecond month following the sale. Labor and supplies estimates alsoappear in the worksheet below. Payments for labor and supplies aretypically made during the month following the one in which thesecosts have been incurred. General and administrative salaries willamount to approximately $27,000 a month; lease payments underlong-term lease contracts will be $9,000 a month; depreciationcharges will be $36,000 a month; miscellaneous expenses will be$2,700 a month; income tax payments of $63,000 will be due in bothSeptember and December; and a progress payment of $180,000 on a newbuilding must be paid in October. Cash on hand on July 1 willamount to $132,000, and a minimum cash balance of $90,000 will bemaintained throughout the cash budget period. What loan will be thecompany require in October? Many say nothing in October but someoneelse says Loan Balance for October - $ 151500 What is the correctway? May June July August September October November DecemberJanuary Collections worksheet: Billed charges $180,000 $180,000$360,000 $540,000 $720,000 $360,000 $360,000 $90,000 $180,000Collections Within 30 days 30-60 days 60-90 days Total collectionsSupplies worksheet: Amount of labor and supplies $90,000 $90,000$126,000 $882,000 $306,000 $234,000 $162,000 $90,000 Payments madefor labor and supplies Net cash gain (loss): Total collectionsTotal purchases General and administrative salaries Lease paymentsMiscellaneous expenses Taxes Progress payment Total payments Netcash gain/loss Borrowing/surplus summary: Cash at beginning with noborrowing Cash at end with no borrowing Target cash balance (given)Cumulative surplus cash / loan balance
| | | | | May | | June | July | August | September | October | November | December | January |
Collections worksheet: | | | | | | | | | | | | |
| Billed charges | | | $180,000 | | $180,000 | $360,000 | $540,000 | $720,000 | $360,000 | $360,000 | $90,000 | $180,000 |
| Collections | | | | | | | | | | | | |
| Within 30 days | | | | | | | | | | | | |
| 30-60 days | | | | | | | | | | | | |
| 60-90 days | | | | | | | | | | | | |
| Total collections | | | | | | | | | | | | |
Supplies worksheet: | | | | | | | | | | | |
| Amount of labor and supplies | | $90,000 | $90,000 | $126,000 | $882,000 | $306,000 | $234,000 | $162,000 | $90,000 |
| Payments made for labor and supplies | | | | | | | | |
Net cash gain (loss): |
| Total collections |
| Total purchases |
| General and administrative salaries |
| Lease payments |
| Miscellaneous expenses |
| Taxes |
| Progress payment |
| Total payments |
| Net cash gain/loss |
Borrowing/surplus summary: |
| Cash at beginning with no borrowing |
| Cash at end with no borrowing |
| Target cash balance (given) |
| Cumulative surplus cash / loan balance |
