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

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

Cash	$ 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.

Required:

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).