Preparing a financial budgetAssume Davis Consulting began January with $29 000 cash. Managementforecasts that cash receipts from credit customers will be $49 000 in January and$51 500 in February. Projected cash payments include equipment purchases ($17 000in January and $40 000 in February) and selling and administrative expenses ($6 000each month).Davis’s bank requires a $20 000 minimum balance in the firm’s checking account.At the end of any month when the account balance falls below $20 000 the bank automatically extends credit to the firm in multiples of $5 000. Davisborrows as little as possible and pays back loans each month in $1 000 increments plus 5% interest on the entire unpaid principal. The first payment occurs onemonth after the loan.Requirements1. Prepare Davis Consulting’s cash budget for January and February 2013.2. How much cash will Davis borrow in February if cash receipts from customersthat month total $21 500 instead of $51 500?
