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, 2014.June 30, 2014, cash balance $45,000Dividends to be declared on July 15* 14,200Cash expenditures to be paid in July for operating expenses 36,700Amortization expense in July 4,100Cash collections to be received in July 85,200Merchandise purchases to be paid in cash in July 55,800Equipment to be purchased for cash in July 20,300*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 $28,640.Prepare a cash budget for the month ended July 31, 2014, and indicate how much money, if any, Trenshaw Company will need to borrow to meet its minimum cash requirement.

$8,640

Explanation:

Consider only the transactions involving cash when preparing the cash budget.

cash budget for the month ended July 31, 2014

Receipts

Cash collections                               85,200

Total                                                  85,200

Payments

Operating expenses                        36,700

Merchandise purchases                  55,800

Equipment                                        20,300

Total                                                  112,800          

Movement During the year          (27,000)

Opening Balance                             45,000

Closing Balance                               18,000

Minimum Cash Balance Desired    28,640

Borrow (Shortfall)                               8,640

Therefore, Trenshaw Company will need to borrow $8,640 to meet its minimum cash requirement.

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