The controller of Trenshaw Company wants to improve the companys control system by preparing a month-by-month cash budget. The following information is for the month ending July 31, 2014.

June 30, 2014, cash balance	$45,000
Dividends to be declared on July 15*	12,000
Cash expenditures to be paid in July for operating expenses	40,800
Amortization expense in July	4,500
Cash collections to be received in July	90,000
Merchandise purchases to be paid in cash in July	56,200
Equipment to be purchased for cash in July	20,000

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

Trenshaw Company wants to keep a minimum cash balance of $25,000.

Instructions:

1. Prepare a cash budget for the month ended July 31, 2014, and indicate how much money, if any, Trenshaw Company will need to borrow to meet its minimum cash requirement.

2. Explain how cash budgeting can reduce the cost of short-term borrowing.