Question

Fayette Medical Clinic has budgeted the following cash flows: January $ 240,000 February $232,000 March $272,000 Cash receipts Cash payments For inventory purchases For S&A expenses 220,000 62,000 164,000 64,000 190,000 54,000 Fayette Medical had a cash balance of $16,000 on January 1. The company desires to maintain a cash cushion of $10,000. Funds are assumed to be borrowed, in increments of $2,000, 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. Fayette pays its vendors on the last day of the month also. The company had a monthly $80,000 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 intermediate and final answers to the nearest whole dollar amounts.)

Answer 1

January $ 16,000 $ 240,000 $ 250,000 February March $ 10,200 $ 10,000 $232,000 $272,000 $242,200 $282,000 Cash Budget Particulars Opening cash Cash Receipts Cash available Cash payments : Purchases S&A expenses Interest paid Total payments Net cash available Finance activity Borrow/(Repayment) Closing Cash $ 220,000 $164,000 | $ 190,000 $ 62,000 $ 64,000 $ 54,000 $ 800 $ 1,170 $ 1,140 $282,800 $229,170 $245,140 | $ (26,800) $ 13,030 | $ 36,860 $ 37,000 $ 10,200 $ (3,030) $ (26,860) $ 10,000 $ 10,000