Howe Ltd. is trying to decide whether it is going to need to take a loan in coming January to buy a new microcomputer system. The microcomputer will cost $8,800. The president, Joan Howe, has collected the following information about her operations as at December 31: 1. Balance of selected ledger accounts: Cash $2,500 Accounts payable 6,667 2. Sales history and forecast (unit selling price, $10): October (actual) $45,000 November (actual) 33,000 December (actual) 45,000 January (forecast) 60,000 3. All sales are on credit and are due 30 days after the sale. 4. Cash payments for purchases are as follows: two-thirds in the month of purchase; one-third in the month after that. 5. Howe Ltd. collects 50% of a month's sales one month after the sale and 45% two months after the sale; 5% are uncollectible. 6. The company purchases inventory as required under terms of 2/10, net 30. It always takes the 2% discount, but records purchases at gross cost. 7. Inventory costs $5 per unit, gross. 8. Other expenses, all paid in cash as incurred, average about 30% of the sales dollar amount. Depreciation is part of these expenses and costs $3,000 per month. 9. Howe Ltd. keeps a minimum cash balance of $4,000.
Prepare a cash budget for January, indicating whether Howe Ltd. will need a loan to finance its computer acquisition.