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.)

Answer 1

Prepare cash budget as follows:

Cash Budget	January	February	March
Beginning cash balance	$9,000	$7,800	$7,000
Add: Cash Receipts	$102,000	$108,000	$128,000
Cash Available (A)	$111,000	$115,800	$135,000
Less: Cash payments
Inventory purchase	$91,000	$73,000	$86,000
S&A expenses	$32,000	$33,000	$28,000
Interest paid (W.N)	$1,200	$1,830	$1,801
Total payments (B)	$124,200	$107,830	$115,801
Net Balance (A-B)	($13,200)	$7,970	$19,199
Financing Activity:
Borrowing	$21,000
Repayment		($970)	($12,199)
Ending Cash balance	$7,800	$7,000	$7,000

_________________________________________________________________________

W.N

Interest :	Amount
January (40,000 × 3%)	$1,200
February [($40,000+$21,000) × 3%]	$1,830
March [($40,000+$21,000-$970) × 3%]	$1,801