Astra Corporation is a distributor of recording equipment in Edinburg. Management is studying the company's cash needs for October through December, 2015 and has gathered the following information: October $ Cash Accounts receivable Accounts payable Purchases of merchandise Purchase of new equipment Cash operating costs Depreciation expense Net credit sales Sale of delivery truck The budgeted balance sheet on September 30 revealed the following account balances: 40,000 11,000 37,500 November $ 46,000 3,000 60,000 35,500 3,300 70,000 December $ 48,000 $23,000 22,000 15,900 39,000 3,300 85,000 20,000 Sixty percent of all customer accounts are collected in the month of sale; 35% are collected in the following month. Because of a liberal credit policy, uncollectible accounts amounting to 5% of sales are anticipated. Management feels that only $19,000 of the accounts outstanding on September 30 will be received. Sixty percent of the merchandise purchases are paid for in the month of purchase to take advantage of a 2% discount. The remaining 40% are paid in the month following purchase. Astra Corporation maintains a $5,000 minimum cash balance at all times. Should borrowing be necessary, financing is available (and repaid/retired in $1,000 multiples at an interest rate of 16% per annum). Assume all borrowings take place at the beginning of the month; repayments/retirements occur at the end of the month. Interest is paid at the time of repaying/retiring principal and computed on the portion of principal repaid/retired. REQUIRED: a. Prepare a cash budget by month for the fourth quarter ending in December 2015. b. Will it be necessary for Astra Corporation to borrow from its bankers? Why? How much should be borrowed? When? c. Give any two reasons why Astra Corporation should prepare a cash budget?