Question 1 LFC Ltd has budgeted sales revenues as follows: Credit Sales ($) Cash Sales ($) Total Sales June 135,000 90,000 225,000 July 145,000 255,000 400,000 August 90,000 195,000 285,000 Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are: June $300,000 July $250,000 August S105,000 Other cash disbursements budgeted: (a) selling and administrative expenses of $48,000 cach month, (b) dividends of $103,000 will be paid in July, and (c) purchase of equipment in August for $30,000 cash. LFC Ltd also has monthly depreciation expenses of $500. The company wishes to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 8% interest per annum if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess of the minimum cash balance. The beginning cash balance on July I was $50,000. Required: Prepare a cash budget for the months of July and August. (10 Marks)