Question

Walton Medical Clinic has budgeted the following cash flows: February $124,000 March January $118,000 Cash receipts Cash payments For inventory purchases For S&A expenses $144,000 94,000 36,000 99,000 40,000 81,000 41,000 Walton Medical had a cash balance of $17,000 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. Walton 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. ) Cash Budget March January February Section 1: Cash Receipts $ Total cash available Section 2: Cash Payments Total budgeted disbursements Section 3: Financing Activities

Answer 1

Dear Student ,

please find below answer based on Cash Budget ..Please look into complete Working Note in details to understand working on cash closing balance , Interest cost etc.

Thank you !!

Walton Medcal care --- Cash Budget
Month	Jan $	Feb $	March $
Opening Balance	17,000	5,600	5,100
Add - Cash receipt	1,18,000	1,24,000	1,44,000
Total cash receipt	1,35,000	1,29,600	1,49,100
Less
Cash payment
Invenory Purchase	99,000	81,000	94,000
S&A expenses	40,000	41,000	36,000
Total cash Payment	1,39,000	1,22,000	1,30,000
Excess/ ( Short)	-4,000	7,600	19,100
receipt over payment
Borrowed amount ( wn)	10,000
Less
Interest	-400	-500	-480
Repayment		-2,000	-13,000
Closing cash balance	5,600	5,100	5,620

Detail Working Note ( Wn)
As per question, Comapmy has to maintain closing Cash Balance
$5000
Credit Line - $ 40000. Interest rate - 1%		Amnt($)
Jan month
Interest Expenses$ - 1% * $40,000		400
Interest amount in Feb - Borrowed fund in Jan $10,000
So Total amount of credit line - $40,000+$10,000== $ 50,000
Interest cost		1%*$50,000		500
March mont == Credit line - $50,000- less payment $ 2000
Interest rate -- 1%
Interest cost == 1% *($50,000-$2000)		480
Need to borrow in Jan to maintain $ 5000
	Short Payment	-4,000	7,600	19,100
	Minimum Bal to maintain	-5,000	-5,000	-5,000
	Less Interest payment	-400	-500	-480
	Total amount to borrow	-9,400	2,100	13,620
	make round up on higher side	10,000
	make round down lower side		2,000	13,000

Gibson Pointers corporation expects -- Sales Budget
Gibson expects Sales in Jan'19 $240,000
Expect to increase sales by 15% in Feb + March
Expect to collect -
70% on accoutn receivable === in the month of sales
23% on accoutn receivable === Following month of sales
7% on accoutn receivable === second month of sales
Sales Budget
Jan $	2,40,000
Feb $	2,76,000
Increase of 15% of Jan Sales
($240,000*115%)
Mar $
Increase of 15% of Jan Sales	3,17,400
($276,000*115%)

Details of cash receipt	Jan $	Feb $	Mar $
Jan $ sales amount $240000
distribute ( 70:23:7)
Receipt from Jan Sales	1,68,000	55,200	16,800
Receipt from Feb Sales (distribute 70:23 sales Feb & Mar= $ feb sales -$276000		1,93,200	63,480
Receipt from Mar Sales (distribute 70 sales   Mar= $ Mar sales -$317400			2,22,180
Total receipt	1,68,000	2,48,400	3,02,460

Account receivable
Feb month - Out of revenue amount , collected 93% so Balance to collect from Debtors
so Account receivable 7% of $ 276000					19,320
Mar month - Out of revenue amount , collected 70% so Balance to collect from Debtors
so Account receivable 30%(23%+7%) of $ 317400					95,220
Total Account receivable $					1,14,540

Jasper Fruit Corporation wholesales Peaches+Oranges
Peaches sales will increase by 5%
Orange sales will increase by 10%
	First Qtr($)	Second Qtr($)	Third Qtr($)	Fourth Qtr($)	Total $
Peaches	2,30,000	2,50,000	3,10,000	2,50,000	10,40,000
Orange	4,05,000	4,55,000	5,75,000	3,85,000	18,20,000
Total	6,35,000	7,05,000	8,85,000	6,35,000	28,60,000
Now reclaulate budget number after consider 5% and 10% increase matter
Peaches	2,30,000	2,50,000	3,10,000	2,50,000	10,40,000
Add- Increase in sales 5%	11,500	12,500	15,500	12,500	52,000
Budgeted sales for next year	2,41,500	2,62,500	3,25,500	2,62,500	10,92,000	a
Oranges	4,05,000	4,55,000	5,75,000	3,85,000	18,20,000
Add- Increase in sales 10%	40,500	45,500	57,500	38,500	1,82,000
Budgeted sales for next year	4,45,500	5,00,500	6,32,500	4,23,500	20,02,000	b
Total Budgeted sales					30,94,000	(a+b)

Budgeted Income Statement		Amnt($)
Budgeted Revenue ( as above)		30,94,000
Less
Cost of goods sold -65% on revenue (65% *$3094000)		20,11,100
Operating Margin		10,82,900
Less
Selling and Admin Overhead		6,20,000	(as per Question)
Net Profit		4,62,900

Inventory Purchase budget
Peaches	First Qtr($)	Second Qtr($)	Third Qtr($)	Fourth Qtr($)	Total $
Revenue	2,41,500	2,62,500	3,25,500	2,62,500	10,92,000
Cost of goods sold -65% on revenue (65% - a	1,56,975	1,70,625	2,11,575	1,70,625	7,09,800
Add- closing Inventory-b	25,594	31,736	25,594	34,000	(as per Question)
( as per Question , need to keep 15% as inventory of Next Quarter Cost of goods sold)
Inventory reuired(a+b)==c	1,82,569	2,02,361	2,37,169	2,04,625
Less- Opening Inventory
( as per Question , need to keep 15% of cost of goods sold as inventory - current Quarter ----- d	23,546	25,594	31,736	25,594
Purchase requirment (c- d)	1,59,023	1,76,768	2,05,433	1,79,031
Oranges	First Qtr($)	Second Qtr($)	Third Qtr($)	Fourth Qtr($)
Revenue	4,45,500	5,00,500	6,32,500	4,23,500
Cost of goods sold -65% on revenue (65% - a	2,89,575	3,25,325	4,11,125	2,75,275
Add- closing Inventory-b	48,799	61,669	41,291	56,500	(as per Question)
( as per Question , need to keep 15% as inventory of Next Quarter Cost of goods sold)
Inventory reuired(a+b)==c	3,38,374	3,86,994	4,52,416	3,31,775
Less- Opening Inventory
( as per Question , need to keep 15% of cost of goods sold as inventory - current Quarter ----- d	43,436	48,799	61,669	41,291
Purchase requirment (c- d)	2,94,938	3,38,195	3,90,748	2,90,484