Question

Baird Medical Clinic has budgeted the following cash flows: January $102,000 February $108,000 March $128,000 Cash receipts Cash payments For inventory purchases For S&A expenses 91,000 32,000 73,000 33,000 86,000 28,000 Baird Medical had a cash balance of $9,000 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. Baird 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. (Round intermediate and final answers to the nearest whole dollar amounts. Any repayments/shortage should be indicated with a minus sign. ) January February March Cash Budget Section 1: Cash Receipts Total cash available Section 2: Cash Payments

Answer 1

Solution:

Cash Budget
	January	February	March
Section 1 Cash Receipts:
Beginning Cash Balance	$9,000	$7,800	$7,000
Add: Cash receipts	$1,02,000	$1,08,000	$1,28,000
Total cash available	$1,11,000	$1,15,800	$1,35,000
Section 2: Cash Payments:
For Inventory Purchases	$91,000	$73,000	$86,000
For S&A Expenses	$32,000	$33,000	$28,000
For Interest Expense	$1,200	$1,830	$1,801
Total Budgeted Disbursements	$1,24,200	$1,07,830	$1,15,801
Section 3: Financing Activities:
Surplus (Shortages)	-$13,200	$7,970	$19,199
Borrowings (repayments)	$21,000	-$970	-$12,199
Ending cash balance	$7,800	$7,000	$7,000