The controller of Tanandar Apparel 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, 2020.

June 30, 2020, cash balance..............................................................Rp45,000,000

Dividends to be declared on July 15*...............................................12,000,000

Cash expenditures to be paid in July for operating expenses..........40,800,000

Amortization expense in July...............................................................4,500,000

Cash collections to be received in July.............................................90,000,000

Merchandise purchases to be paid in cash in July.........................56,200,000

Equipment to be purchased for cash in July....................................20,000,000

*Dividends are payable 30 days after declaration to shareholders of record on the declaration date. Tanandar wants to keep a minimum cash balance of Rp25,000,000.

Instructions

a. Prepare a cash budget for the month ended July 31, 2020, and indicate how much money, if any, Tanandar will need to borrow to meet its minimum cash requirement.

b. Explain how cash budgeting can reduce the cost of short-term borrowing.