Natural Care Corp., a distributor of natural cosmetics, is ready to begin its third quarter, in which peak sales occur. The company has requested a 90-day loan from its bank to help meet cash requirements during the quarter. Because Natural Care has experienced difficulty in paying off its loans in the past, the banks loan officer has asked the company to prepare a cash budget for the quarter. In response to this request, the following data have been assembled:

a. On July 1, the beginning of the third quarter, the company will have a cash balance of $43,000.

b. July August September

Total cash receipts from customers $290,000 $355,600 $431,000

c. Budgeted merchandise purchases and budgeted expenses for the third quarter are given below: J

July August September

Merchandise purchases $160,000 $160,000 $155,000

Salaries and wages $70,000 $70,000 $65,000

Advertising $80,000 $90,000 $100,000

Rent payments $30,000 $30,000 $30,000

Depreciation $40,000 $40,000 $40,000

d. Equipment costing $25,000 will be purchased for cash during July.

e. In preparing the cash budget, assume that sufficient amount of loan will be made in July and repaid in September. Interest on the loan will total $2,000.

f. The company needs a minimum cash balance of $30,000 to start each month.

Required:

1. Prepare a cash budget for July, August, and September and in total, for the third quarter.