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Whitlock, Inc., buys hardware parts from various manufacturers and sells them to retail stores. Management is currently trying to prepare a cash budget for August

Whitlock, Inc., buys hardware parts from various manufacturers and sells them to retail
stores. Management is currently trying to prepare a cash budget for August and has the
following information available:
a. The cash balance on August 1 is $25,000.
b. Actual sales for June and July and projected sales for August are as follows:
June July August
Cash sales $ 30,000 $ 45,000 $ 50,000
Credit sales 100,000120,000130,000
Credit sales are collected 63% during the month of sale, 26% during the month
following the sale, and 11% during the second month following the sale.
c. Whitlocks actual purchases for June and July and its projected purchases for
August are as follows:
June July August
Cash purchases $ 10,000 $ 20,000 $ 25,000
Credit purchases 40,00050,00060,000
All accounts payable are paid in the month following the purchase.
d. Total administrative and selling expenses (including $14,000 depreciation) for
August are expected to be $105,000.
e. Whitlock expects to pay a $26,000 dividend to stockholders and to purchase, for
cash, a $25,000 piece of land during August.
f. Cash on hand should never drop below $25,000.
1. Prepare Whitlocks August cash budget, assuming that the company borrows any
amounts needed to meet its minimum desired balance.
2. Interpretive Question: What types of expenses other than depreciation would
be excluded from a cash budget?

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