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Whitlock, Inc., buys hardware parts from various manufacturers and sells them to retail

stores. Management is currently trying to prepare a cash budget for August and has the

following information available:

a$.$ The cash balance on August $1$ is $$25,000.$

b$.$ Actual sales for June and July and projected sales for August are as follows:

June July August

Cash sales $ $30,000$ $ $45,000$ $ $50,000$

Credit sales $100,000120,000130,000$

Credit sales are collected $63\%$ during the month of sale, $26\%$ during the month

following the sale, and $11\%$ during the second month following the sale.

c$.$ Whitlock$$s actual purchases for June and July and its projected purchases for

August are as follows:

June July August

Cash purchases $ $10,000$ $ $20,000$ $ $25,000$

Credit purchases $40,00050,00060,000$

All accounts payable are paid in the month following the purchase.

d$.$ Total administrative and selling expenses $($including $$14,000$ depreciation$)$ for

August are expected to be $$105,000.$

e$.$ Whitlock expects to pay a $$26,000$ dividend to stockholders and to purchase, for

cash, a $$25,000$ piece of land during August.

f$.$ Cash on hand should never drop below $$25,000.$

$1.$ Prepare Whitlock$$s August cash budget, assuming that the company borrows any

amounts needed to meet its minimum desired balance.

$2.$ Interpretive Question: What types of expenses other than depreciation would

be excluded from a cash budget?

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