Question

The controller of Trenshaw Company wants to improve the company's control system by preparing a month-by-month cash budget. The following information is for the month ending July 31, 2017.

June 30, 2017, cash balance $44,000
Dividends to be declared on July 15* 13,800
Cash expenditures to be paid in July for operating expenses 36,500
Amortization expense in July 4,900
Cash collections to be received in July 85,600
Merchandise purchases to be paid in cash in July 55,200
Equipment to be purchased for cash in July 20,500
Dividends are payable 30 days after the declaration to shareholders of record on the declaration date.

Trenshaw Company wants to keep a minimum cash balance of $27,000.

Prepare a cash budget for the month ended July 31, 2017, and indicate how much money, if any, Trenshaw Company will need to borrow to meet its minimum cash requirement.

Answer 1

Cash budget for the month ended July 31, 2017

Receipts:

Cash collections $85,600

Total $85,600

Payments:

Operating expenses $36,500

Merchandise purchases $55,200

Equipment purchases $20,500

Total $112,200

Opening Balance $44,000

Movement During the year ($26,000)

Closing Balance $18,000

Desired Balance $27,000

Loan $9,000

Step-by-step explanation:

A cash budget shows a future estimate of future cash incomes and cash expenditures.