Prepare Lipman Auto Parts’ cash budget for January and February. How much cash will Lipman Auto Parts borrow in February if collections from customers that month total $13,800.00 instead of $14,800.00?

The answer given is for the data given in the question below.

Explanation:

The complete question is :

Lipman Auto Parts, a family-owned auto parts store,began January with $10,300 in cash.  Management forecasts that collection from credit customers will be $11,400.00 in January and $14,800 in February.  The store is scheduled to receive $5,000.00 in cash on a business note receivable in January.  Projected cash payments include inventory purchases($13,000 in January and $13,600 in February) and operating expenses ($2,700 each month). Lipman Auto Parts' bank requires $10,000 minimum balance in the store's checking account.  At the end of any month when the account balance dips below $10,000, the bank automatically extends credit to the store in multiples of $1,000. Lipman Auto Parts borrows as little as possible and pays back loans in quarterly installments of $2,000, plus 4 percent interest on the entire unpaid principal. The first payment occurs three months after the loan.

Prepare Lipman Auto Parts' cash budget for January and February

How much cash will Lipman auto Pars borrow in February if collections form customer that month total $13,800 instated of $14,800?

Answer would be like this :

Lipman Auto Parts

Cash Budget

                                                                         January      - February

January February Beginning cash balance $ 10,300        $ 41,000

Cash collections from customers                  $ 11,400         $ 14,800

Collection of note receivable                          $ 5,000       $ -

Total cash available                                       $ 56,700       $ 55,800

Cash payments:

Purchases of inventory                                 $ 13,000       $ 13,600

Operating expenses                                      $ 2,700         $ 2,700

Total cash payments                                      $ 15,700      $ 16,300

Ending Cash Balance Before Financing      $ 41,000        39,500

Less Required Cash Balance                          10,000         10,000

Cash Excess                                                  $ 31,000        29500

Financing of Cash Deficiency                                    

Ending Cash Balance                                    $ 41,000      39500

Lipman Auto Parts

Cash Budget

                                                                         January      - February

January February Beginning cash balance $ 10,300        $ 41,000

Cash collections from customers                  $ 11,400         $ 13,800

Collection of note receivable                          $ 5,000       $ -

Total cash available                                       $ 56,700       $ 54,800

Cash payments:

Purchases of inventory                                 $ 13,000       $ 13,600

Operating expenses                                      $ 2,700         $ 2,700

Total cash payments                                      $ 15,700      $ 16,300

Ending Cash Balance Before Financing      $ 41,000        38,500

Less Required Cash Balance                          10,000         10,000

Cash Excess                                                  $ 31,000        28500

Financing of Cash Deficiency                                    

Ending Cash Balance                                    $ 41,000      38500

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.