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This problem continues the Daniels Consulting situation from Problem P20-43 of Chapter 20. 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 furn 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. Requirements

  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?


Answered 1 year ago
Answered 1 year ago
Step 1
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For this exercise, we will help Daniels' Consulting prepare a cash budget for the first two months of 2018. Additionally, we will assess whether the entity will need to borrow cash if February cash receipts do not turn as expected.

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