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In: Accounting

Assume DontonDonton Consulting began JanuaryJanuary with $14,000 cash. Management forecasts that cash receipts from credit customers...

Assume DontonDonton Consulting began JanuaryJanuary with $14,000 cash. Management forecasts that cash receipts from credit customers will be $45,000 in January and $49,500 in February. Projected cash payments include equipment purchases ($15,000 in January and $40,000 in February ) and selling and administrative expenses ($3,000 each month). Donton '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. Donton borrows as little as possible and pays back loans each month in $1,000 increments, plus 66 % interest on the entire unpaid principal. The first payment occurs one month after the loan.
Requirements
1. Prepare Donton Consulting's cash budget for January and February 2018.
2. How much cash will Donton borrow in February if cash receipts from customers that month total $39,500 instead of 49,500??

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Expert Solution

ekkarill92 answered 2 years ago
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