Newman Medical Clinic has budgeted the following cash flows. January February March Cash receipts $ 106,000...

Newman Medical Clinic has budgeted the following cash flows.

	January		February		March
Cash receipts	$	106,000	$	112,000	$	132,000
Cash payments
For inventory purchases		93,000		75,000		88,000
For S&A expenses		34,000		35,000		30,000

Newman Medical had a cash balance of $11,000 on January 1. The company desires to maintain a cash cushion of $5,000. Funds are assumed to be borrowed, in increments of $1,000, and repaid on the last day of each month; the interest rate is 1 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.)

Expert Solution

		Jan	Feb	March
	Beginning cash balance	$ 11,000.00	$ 5,600.00	$ 5,000.00
Add:	Cash receipt	$ 106,000.00	$ 112,000.00	$ 132,000.00
	Cash available	$ 117,000.00	$ 117,600.00	$ 137,000.00
Less:	Cash payments
	For inventory purchase	$ 93,000.00	$ 75,000.00	$ 88,000.00
	For S&A expense	$ 34,000.00	$ 35,000.00	$ 30,000.00
	Interest expense per month	$ 400.00	$ 560.00	$ 540.00
	Total budgeted expense	$ 127,400.00	$ 110,560.00	$ 118,540.00
	Payment minus receipts
	Surplus (shortage)	$ (10,400.00)	$ 7,040.00	$ 18,460.00
	Financing Activity
	Borrowing (repayment)	$ 16,000.00	$ (2,040.00)	$ (13,460.00)
	Ending cash balance	$ 5,600.00	$ 5,000.00	$ 5,000.00

Workings:
Computation of Interest:

For Jan	($ 40000 x 1%)	$ 400
For Feb	[($ 40000 + $ 16000) x 1%]	$ 560
For March	[($ 40000 + $ 16000 - $ 2040) x 1%]	$ 540

ekkarill92 answered 1 year ago

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