Newman Medical Clinic has budgeted the following cash flows. Newman Medical had
ID: 2469269 • Letter: N
Question
Newman Medical Clinic has budgeted the following cash flows. Newman Medical had a cash balance of $16,000 on January 1. The company desires to maintain a cash cushion of $9,000. Funds are assumed to be borrowed, in increments of $1,000, and repaid on the last day of each month; the interest rate is 2 percent per month. Repayments may be made in any amount available. Newman pays its vendors on the last day of the month also. The company had a monthly $40,000 beginning balance in its line of credit liability account from this year's quarterly results. Required Prepare a cash budget. (Any repayments/shortage should be indicated with a minus sign. Round your answers to the nearest whole dollar amount.)Explanation / Answer
Cash Budget
January
February
March
Beginning cash balance
$16,000.00
$9,200.00
$9,000.00
Add: Cash receipt
$1,16,000.00
$1,22,000.00
$1,42,000.00
Cash available
$1,32,000.00
$1,31,200.00
$1,51,000.00
Less: Cash payments
For inventory purchases
$98,000.00
$80,000.00
$93,000.00
For S&A expenses
$39,000.00
$40,000.00
$35,000.00
Interest expense per month
($40,000 * 2%)
$800.00
($40,000 + $15,000) * 0.02
$1,100.00
($55,000 - $1,100) * 0.02
$1,078.00
Total budgeted payments
$1,37,800.00
$1,21,100.00
$1,29,078.00
Payments minus receipts
Surplus(Shortage)
-$5,800.00
$10,100.00
$21,922.00
Financing activity
Borrowing (Repayment)
$9,000 - (-$5,800) = $14,800
$15,000.00
$10,100 - $9,000
-$1,100.00
$21,922 - $9,000
-$12,922.00
Ending cash balance
$9,200.00
$9,000.00
$9,000.00
Cash Budget
January
February
March
Beginning cash balance
$16,000.00
$9,200.00
$9,000.00
Add: Cash receipt
$1,16,000.00
$1,22,000.00
$1,42,000.00
Cash available
$1,32,000.00
$1,31,200.00
$1,51,000.00
Less: Cash payments
For inventory purchases
$98,000.00
$80,000.00
$93,000.00
For S&A expenses
$39,000.00
$40,000.00
$35,000.00
Interest expense per month
($40,000 * 2%)
$800.00
($40,000 + $15,000) * 0.02
$1,100.00
($55,000 - $1,100) * 0.02
$1,078.00
Total budgeted payments
$1,37,800.00
$1,21,100.00
$1,29,078.00
Payments minus receipts
Surplus(Shortage)
-$5,800.00
$10,100.00
$21,922.00
Financing activity
Borrowing (Repayment)
$9,000 - (-$5,800) = $14,800
$15,000.00
$10,100 - $9,000
-$1,100.00
$21,922 - $9,000
-$12,922.00
Ending cash balance
$9,200.00
$9,000.00
$9,000.00