Bass Lighting Fixtures’ July 31, 2001, balance sheet includes the following:

Cash $30,000 debit Accounts Receivable 92,000 debit Allowance for Uncollectible Accounts 2,044 credit Merchandise Inventory 12,266 debit The firm’s management has designated $30,000 as the firm’s monthly minimum cash balance. Other information about Bass follows:

• Revenues of $200,000 and $240,000 are expected for August and September, 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 approximates 60 percent of sales revenues.

• Management wants to end each month with 10 percent of that month’s cost of sales in Merchandise Inventory.

• All Accounts Payable for inventory are paid in the month of purchase.

• Other monthly expenses are $26,000, which includes $4,000 of depreciation, but does not include uncollectible accounts expense.

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).