Newman Medical Clinic has budgeted the following cash flows: Newman Medical had
ID: 2510762 • 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.
Prepare a cash budget.
Just missing Interest expense per month and borrowing (repayment)
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 37,000 Cash Budget January February March Beginning cash balance Add: Cash receipts Cash available Less: Cash payments $ 18,000(3,000(1,000) 146,000 145,000 120,000 138,000 126,000 123,000 For inventory purchases For S&A; expenses Interest expense per month 100,000 41,000 82,000 42,000 95,000 37,000 141,000 124,000 132,000 Total budgeted payments Payments minus receipts (3,000) (1,000) 13,000 Surplus (shortage) Financing Activity Borrowing (repayment) nding cash balance $(3,000)(1,000)$13,000Explanation / Answer
CASH BUDGET Cash Budget January February March Beginning Cash balance $18,000.00 $7,000.00 $7,000.00 Add : Cash Receipts $120,000.00 $126,000.00 $146,000.00 Cash available $138,000.00 $133,000.00 $153,000.00 Less : Cash Payments For Inventory Purchases $100,000.00 $82,000.00 $95,000.00 For S & A expenses $41,000.00 $42,000.00 $37,000.00 Interest Expense per month $0.00 $300.00 $249.00 Total Budgeted Payments $141,000.00 $124,300.00 $132,249.00 Payments minus receipts Surplus (shortage) -$3,000.00 $8,700.00 $20,751.00 Financing Activity Borrowings (repayments) $10,000.00 -$1,700.00 -$8,300.00 Ending Cash balance $7,000.00 $7,000.00 $12,451.00