Newman Medical Clinic has budgeted the following cash flows: Newman Medical had
ID: 2508246 • Letter: N
Question
Newman Medical Clinic has budgeted the following cash flows:
Newman Medical had a cash balance of $18,000 on January 1. The company desires to maintain a cash cushion of $7,000. Funds are assumed to be borrowed, in increments of $1,000, and repaid on the last day of each month; the interest rate is 3 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
January February March Cash receipts $ 120,000 $ 126,000 $ 146,000 Cash payments For inventory purchases 100,000 82,000 95,000 For S&A expenses 41,000 42,000 37,000Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Cash Budget January February March Beginning Balance 18,000.00 7,800.00 7,000.00 Cash receipts 120,000.00 126,000.00 146,000.00 Cash Available 138,000.00 133,800.00 153,000.00 Less Cash payments: Inventory Purchases 100,000.00 82,000.00 95,000.00 S&A expenses 41,000.00 42,000.00 37,000.00 Interest Payment 1,200.00 1,560.00 1,522.80 Total Budgeted Payments 142,200.00 125,560.00 133,522.80 Payments minus receipts (4,200.00) 8,240.00 19,477.20 Desired Minimum balance 7,000.00 7,000.00 7,000.00 Financing Activity Money Borrowed/Paid 12,000.00 (1,240.00) (12,477.20) Ending Balance 7,800.00 7,000.00 7,000.00 Total Loan 52,000.00 50,760.00 38,282.80