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prepare the cash budget for august including the effects of financing borrowing or i 643051

The July 31, 2010, balance sheet for World Windows Inc. includes the following information


$ 40,000 debit

Accounts Receivable

270,000 debit

Merchandise Inventory

18,000 debit

The firm’s management has designated $35,000 as the firm’s monthly minimum cash balance. Other information about World Windows is as follows:

  • Revenues of $650,000, $720,000, and $825,000 are expected for August, September, and October, respectively. All goods are sold on account.
  • The collection pattern for accounts receivable is 55 percent in the month of sale, 44 percent in the month following the sale, and 1 percent uncollectible.
  • Cost of Goods Sold (CGS) approximates 60 percent of sales revenues.
  • Management wants to end each month with units costing the equivalent of 5 percent of the following month’s CGS. Unit costs are assumed to be stable.
  • All accounts payable for inventory are paid in the month of purchase.
  • Other monthly expenses are $78,000, which includes $12,000 of depreciation but does not include uncollectible accounts expense.
  • Investments of excess cash are made in $5,000 increments.


a. Forecast the August cash collections.

b. Forecast the August and September cost of purchases.

c. Prepare the cash budget for August including the effects of financing (borrowing or investing).

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