Dorothy K leased space . Runs out of cash. Late payments on orders, problems with suppliers. Planning to borrow $. Cash budget : Sales are made based on cash only. purchases must be aid during following month. Salary $4,800 per month, reent $2,000 per month. Tax payment $12,000 in December. Current cash (December 1) $400, but agreed to manti an average bank balance of $6,000 - target cash balance. Purchases during November $140,000
December Sales $160,000 Purchases $40,000
January Sales $40,000 Purchases $40,000
February Sales $60,000 Purchases $40,000
1. Prepare cash budget for Dec Jan Feb
2. Suppose that starts selling on credit basis on Dec1st, giving customers 30 days to pay. What would the company's loan requirements be at the end of December in this case? Include calculations in answer