The controller of Trenshaw Company wants to improve the company’s control system

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.

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 Dividends to be declared on July 15 Cash expenditures to be paid in July for operating expenses Amortization expense in July Cash collections to be received in July Merchandise purchases to be paid in cash in July Equipment to be purchased for cash in July $43,800 14,800 37,500 4,400 83,800 55,800 20,200 Dividends are payable 30 days after declaration to shareholders of record on the declaration date. Trenshaw Company wants to keep a minimum cash balance of $25,700 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. TRENSHAW COMPANY Cash Budget

Explanation / Answer

Cash Budget for July 2017

Note:

a) Amortization expense is a non cash item

b) dividend has been declared on July 15th and therefore will be paid in the month of August

Beginning Balance $     43,800 Cash collections $     83,800 Total cash available (A) $ 1,27,600 Cash Disbursements Cash operating expenses $     37,500 cash purchase of merchandise $     55,800 Equipment purchased in cash $     20,200 Total cash disbursements (B) $ 1,13,500 Surplus (A - B) $     14,100 Borrowings $     11,600 Cash balance July 31 2017 $     25,700

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