Question
McBride Medical Clinic has budgeted the following cash flows.
Janurary Febuary March
Cash receipts $101,000 $108,000 $125,000
Cash payments
For inventory purchases 92,000 72,000 83,000
For S&A expenses 30,000 32,000 26,000
McBride Medical had a cash balance of $7,000 on January 1. The company desires to maintain a cash cushion of $5,000. Funds are assumed to be borrowed, in the increments of McBride pays its vendor on the last day of the month also. The company had a $30,000 beginning balance in its line of credit liability account.
Required
Prepare a cash budget. (Round all computations to the nearest whole dollar.)
Explanation / Answer
CASH BUDGET FOR JANUARY, FEBRUARY AND MARCH January February March Opening Cash balance $7,000 $5,000 $5,000 Cash Receipts $101,000 $108,000 $125,000 Borrowings $19,000 Total Available Cash - (A) $127,000 $113,000 $130,000 Less: Cash Payments Inventory Purchases $92,000 $72,000 $83,000 Selling & Administration Expence $30,000 $32,000 $26,000 Payments to borrowers $4,000 $16,000 Total Expences: -(B) $122,000 $108,000 $125,000 Estimated Closing Cash balance(A-B) $5,000 $5,000 $5,000 Credit Liability (Borrowers)A/C 28-Feb Cash paid $4,000 1-Jan Balance b/d $30,000 31-Mar Cash paid $16,000 31-Jan Borrowings $19,000 31-Mar Balance c/d $29,000 $49,000 $49,000 Assumptions: We have to maintain minimum $5000 thats why i borrowed monye $19000 on january 31, We have excess money of $4000 at the end of february month, and $16000 march month so i paid this money to borrowers, because only $5000 enough to us. Thank you... CASH BUDGET FOR JANUARY, FEBRUARY AND MARCH January February March Opening Cash balance $7,000 $5,000 $5,000 Cash Receipts $101,000 $108,000 $125,000 Borrowings $19,000 Total Available Cash - (A) $127,000 $113,000 $130,000 Less: Cash Payments Inventory Purchases $92,000 $72,000 $83,000 Selling & Administration Expence $30,000 $32,000 $26,000 Payments to borrowers $4,000 $16,000 Total Expences: -(B) $122,000 $108,000 $125,000 Estimated Closing Cash balance(A-B) $5,000 $5,000 $5,000