Prolog Ltd. is a small wholesaler of powerful microcomputers. In recent months, it has been selling 50 machines a month at a price of $2,000 each. These machines cost $1,600 each. A new model has just been launched and this is expected to offer greatly enhanced performance. Its selling price and cost will be the same as for the old model. From the beginning of January 2011, sales are expected to increase at a rate of 20 machines each month until the end of June 2011, when sales will amount to 170 units per month. They are expected to continue at that level thereafter. Operating costs, including depreciation of $2,000 a month, are forecast as follows:

Prolog expects to receive no credit for operating costs. Additional shelving for storage costing $12,000 will be bought, installed, and paid for in April. Corporate tax of $25,000 is due at the end of March. Prolog expects that customers will take two months to pay. To give its customers a good level of service, Prolog plans to hold enough inventory at the end of each period to fulfill anticipated demand in the following month. The computer manufacturer, however, grants one month's credit to Prolog. Prolog Ltd.'s balance sheet is shown below.

Required:
(a) Prepare a projected cash budget for Prolog Ltd., showing the cash balance or required overdraft for each month in the six months ending June 30, 2011.
(b) State briefly what further information a banker would require from Prolog before granting additional overdraft privileges for the anticipated expansion of sales.

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Jan. Feb. Mar. Apr. May Jun 12 Operating costs (5000 10 12 12 Prolog Ltd. Balance Sheet as at December 31, 20110 (in $ thousands) Current assets Accounts receivable Inventory Total current assets Property, plant, and equipment Total assets Current liabilities Bank overdraft Accounts payable Income taxes payable Total current liabilities Shareholders' equity Common shares Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 200 112 312 80 392 68 112 25 205 10 187 392