Newman Medical Clinic has budgeted the following cash flows. January February Ma
ID: 2469281 • Letter: N
Question
Newman Medical Clinic has budgeted the following cash flows. January February March Cash receipts Cash payments $119,000 $125,000 $145,000 For inventory purchases 99,50081,500 94,500 40,500 41,500 36,500 For S&A; expenses Newman Medical had a cash balance of $17,500 on January 1. The company desires to maintain a cash cushion of $6,000. 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
Prepare a cash budget for the month of Jan to Mar is as follows:
Cash Budget
Jan
Feb
Mar
Opening balance
$ 17,500
$ 6,000
$ 7,200
Cash receipts
$ 119,000
$ 125,000
$ 145,000
Loan taken
$ 10,300
$ -
Cash available
$ 146,800
$ 131,000
$ 152,200
Less: Cash payments
For inventory purchases
$ 99,500
$ 81,500
$ 94,500
For S&A expenses
$ 40,500
$ 41,500
$ 36,500
Interest (40,000 *2%)
$ 800
$ 800
$ 800
Total budgeted payments
$ 140,800
$ 123,800
$ 131,800
Financing activity
$ 6,000
$ 6,000
$ 6,000
Closing balance
$ 6,000
$ 1,200
$ 14,400
Cash Budget
Jan
Feb
Mar
Opening balance
$ 17,500
$ 6,000
$ 7,200
Cash receipts
$ 119,000
$ 125,000
$ 145,000
Loan taken
$ 10,300
$ -
Cash available
$ 146,800
$ 131,000
$ 152,200
Less: Cash payments
For inventory purchases
$ 99,500
$ 81,500
$ 94,500
For S&A expenses
$ 40,500
$ 41,500
$ 36,500
Interest (40,000 *2%)
$ 800
$ 800
$ 800
Total budgeted payments
$ 140,800
$ 123,800
$ 131,800
Financing activity
$ 6,000
$ 6,000
$ 6,000
Closing balance
$ 6,000
$ 1,200
$ 14,400