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.

*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 $28,100.

(a)

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.

June 30, 2017, cash balance $44,900 Dividends to be declared on July 15* 14,500 Cash expenditures to be paid in July for operating expenses 36,600 Amortization expense in July 4,600 Cash collections to be received in July 83,400 Merchandise purchases to be paid in cash in July 55,000 Equipment to be purchased for cash in July 20,700

Explanation / Answer

Solution:-

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Trenshaw Company Cash budget For the month ended July 31, 2017 Beginning cash balance 44,900 Add: Cash collection 83,400 Total cash available 128,300 Less: Cash disbursements Operating expenses 36,600 Merchandise purchases 55,000 Equipment purchases 20,700 Total cash disbursements 112,300 Excess of available cash over disbursements 16,000 Add: borrowings 12,100 Ending cash balance 28,100

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