Nelson Company is preparing its budget for the third quarter. The cash balance on June 30 was $30,000. The company wants a minimum cash balance of $12,000, otherwise borrowing is undertaken at the beginning of the month at 10% interest. The interest expense payment and repayment of principal is not made until the entire amount borrowed can be repaid at once. Additional budgeted data are provided here:

July Aug Sep

Cash collections $30,000 $58,000 $54,000

Cash payments:

Purchases of direct materials 25,000 26,000 21,000

Direct labor 10,000 12,000 11,000

Operating expenses 4,000 6,000 4,000

Capital expenditures 12,000 13,000 11,000

Prepare the cash budget for July and August, using the following format.

	July	August	Total
Beginning cash balance
Cash receipts
Cash available
Cash payments:
Purchases of direct materials
Direct labor
Operating expenses
Capital Expenditures
Total cash payments
Ending cash balance before financing
Minimum cash balance desired
Projected cash excess (deficiency)
Financing:
Borrowing

Answer rating: 100% (QA)

To prepare the cash budget for July and August we will use the provided data and follow the given format Lets calculate each section July Beginning ca... View the full answer