Answer and Explanation:
The preparation of the cash budget is shown below:
Beginning Cash Balance $40,000
Budgeted Cash Receipts $225,000
Total Cash Available $265,000
Less
Payment of Raw Mat purchases in Aug ( $80,000 × 35%) $28,000.00
Payment of Raw Mat purchases in Sep ($110,000 × 65%) $71,500
Direct Labor Payment $40,000
Other Cash Expenses $60,000
Income Tax Paid $10,000
Bank Loan Interest Paid $1,000
Total Cash Disbursements $210,500
Closing Cash Balance $54,500
We simply deduct the all cash expenses from the total cash available so that the closing cash balance could come
