The controller of Arrowroot Company wishes to improve the company's control system by preparing a monthly cash budget. The following information relates to the month ending July 31st, 2021:

June 30, 2021, cash balance ................................................................$ 90,000

Dividends to be declared on June 15*......................................................24,000

Cash expenditures to be paid in July for operating expenses...................73,600

Depreciation expense................................................................................9,000

Cash collections to be received..................................................................178,000

Merchandise purchases to be paid in cash.................................................112,400

Equipment to be purchased for cash...........................................................41,000

Arrowroot Company wishes to maintain a minimum cash balance of..........30,000

*Dividends are payable to shareholders of record on declaration date, 30 days after declaration

Required:

1. Prepare a cash budget for the month ended July 31, 2021, indicating how much, if anything. Arrowroot will need to borrow to meet its minimum cash requirement.

2. Supposing the cash management policy at Arrowroot permits borrowing up to $30,000 for the purpose of financial slack, how much will be borrowed? Contrast your answer to the one obtained in Requirement (1).

3. Explain how cash budgeting can facilitate cash management at Arrowroot.