Sol Enterprises, a chocolate distribution company, prepares its master budget on a monthly and quarterly basis. Actual sales in December 2019 were $60,000. Budgeted sales for January, February, March and April 2020 are $72,000, $80,000, $80,000, and $50,000, respectively. Sales are collected at a rate of 30% for cash, and 70% on credit. All payments on credit sales are collected in the month following the sale. Inventory on December 1, 2019 is $13,280. Gross profit rate is 40%. At the end of each month, inventory on hand should equal 40% of the following month s sales needs, stated at cost (i.e., expected cost of goods sold). December 2019 purchases for inventory were $40,000. The company pays for inventory in the current month and in the month following. Monthly expenses are budgeted as follows: 

(a) Selling and general is 11% of sales,

(b) Depreciation $4,000 per month, 

(c) Salaries and wages are fixed at $6,800 per month, 

(d) Advertising is $6,000. In January 2020, the company expects to purchase equipment of $16,000.

 In February 2020, it is expected to purchase equipment of $4,000 in the month and $1,000 in March.The beginning cash balance in 2020 is $16,000 with no loans outstanding. The company is required by its loan covenants to maintain a cash balance of $10,000 in January and $2,000 in February. Further, it has an open line of credit with the bank. To reduce banking transaction cost, borrowing must be done at the beginning of a month and all repayments must be made at the end of a month. Finally, loans and repayments of principal must be in multiples of $1,000. Interest is paid only at the time of repayment of principal. The annual interest rate is 12%.