Fenway Companys balance sheet as of December 31, 2012 is provided below:

Balance Sheet -> December 2012

Assets

Cash $30,000

Accounts Receivable $27,000

Inventory $30,000

Plant and Equipment, net of accumulated depreciation $145,000

Total Assets $232,000

Liabilities and Stockholders Equity

Accounts Payable $25,000

Notes Payable $20,000

Capital Stock, no par $100,000

Retained Earnings $87,000

Total liabilities and stockholders equity $232,000

In anticipation of preparing the operating budget for the upcoming period, the firms accountant has gathered the following information:

a) Sales are budgeted at $120,000 for January 2013. Of these sales, 20% will be cash sales and the remainder will be credit sales. Seventy percent of the credit sales are collected in the month of sale and the remainder is collected in the next month.

b) Costs of goods sold are expected to total $87,500 during January. The inventory account is expected to have a $22,500 balance at January 31, 2013.

c) Inventory purchases are all on account. Sixty percent of all purchases are paid for in the month of purchase and the remainder is paid in the following month.

d) Selling and administrative expenses for January 2013 are budgeted at $50,000 (including depreciation expenses amounted to $10,000), plus 10% of sales.

e) The notes payable will be paid in January 2013. The amount due will be $20,200. The $200 represents Januarys interest expense (NOT included in the S&GA

expenses above).

f) The company will buy a new display equipment costing $4,800 during January.

A) Compute the budgeted inventory purchase during January.

B) Prepare a cash budget in good form for January 2013. The company must

maintain a minimum cash balance of $5,000. How much, if any, will the company

need to borrow during January?