Reference no: EM133067790
Problem - Preparing a financial budget - Assume Daniels Consulting began January with $12,000 cash, Management forecasts that cash receipts from credit customers will be $52,000 in January and $55,000 in February. Projected cash payments include equipment purchases ($16,000 in January and $40,400 in February) and selling and administrative expenses ($6,000 each month).
Daniels's bank requires a $23,000 minimum balance in the firm's checking account at the end of any month when the account balance falls below $23,000, the bank automatically extends credit to the firm in multiples of $5,000. Daniels borrows as little as possible and pays back loans each month in $1,000 increments, plus 12% interest on the entire unpaid principal. The first payment occurs one month after the loan.
Required -
1. Prepare Daniels Consulting's cash budget for January and February 2018.
2. How much cash will Daniels borrow in February if cash receipts from customers that month total $30,000 instead of $55,000?
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