The CFO of Takwa Company wants to improve the companys control system by preparing a month-by-month cash budget. The following information is for the month ending December 31, 2019. December-1, 2019, cash balance $45,000 Dividends to be declared on December* 12,000 Cash expenditures to be paid in December for operating expenses 40,800 Amortization expense in December 4,500 Cash collections to be received in December 90,000 Merchandise purchases to be paid in cash in December 56,200 Equipment to be purchased for cash in December 20,000 *Dividends are payable 30 days after declaration to shareholders of record on the declaration date. Takwa Company wants to keep a minimum cash balance of $25,000.

Instructions: (a) Prepare a cash budget for the month ended December 31, 2019, and indicate how much money, if any, the Company will need to borrow to meet its minimum cash requirement.

(b) Explain how cash budgeting can reduce the cost of short-term borrowing.