Question

Pletcher Dental Clinic is a medium-sized dental service specializing in family dental care. The clinic is currently preparing the master budget for the first 2 quarters of 2017. All that remains in this process is the cash budget. The following information has been collected from other portions of the master budget and elsewhere.

Beginning cash balance Required minimum cash balance Payment of income taxes (2nd quarter) Professional salaries: 1st quarter 2nd quarter Interest from investments (2nd quarter) Overhead costs: 1st quarter 2nd quarter Selling and administrative costs, including $2,104 depreciation: 1st quarter 2nd quarter Purchase of equipment (2nd quarter) Sale of equipment (1st quarter) Collections from clients: 1st quarter 2nd quarter Interest payments (2nd quarter) $31,560 26,300 4,208 147,280 147,280 7,364 81,004 105,200 52,600 73,640 52,600 12,624 247,220 399,760 210

Prepare a cash budget for each of the first two quarters of 2017. (Do not leave any answer field blank. Enter 0 for amounts.)

Answer 1

The cash budget for the first 2 quarters of 2017 is given below:

Pletcher Dental Clinic
Cash Budget
For the Quarters Ending June 30, 2017
	1st Quarter	2nd Quarter
Beginning Cash Balance	31,560	26,300
Add Receipts
Collection from Clients	2,47,220	3,99,760
Sale of Equipment	12,624	0
Investment Interest	0	7,364
Total Receipts	259,844	407,124
Total Cash Available	291,404	433,424
Less Disbursements
Professional Salaries	147,280	147,280
Payment of Income Taxes	0	4,208
Selling and Administrative Costs	50,496 (52,600-2,104)	71,536 (73,640-2,104)
Equipment Purchase	0	52,600
Overhead Costs	81,004	105,200
Total Disbursements	278,780	380,824
Excess (Deficiency) of Cash Available over Disbursements	12,624	52,600
Financing
Add Borrowings (26,300 – 12,624)	13,676	0
Less Repayments (13,676 + 210)	0	13,886
Ending Cash Balance	$26,300	$38,714

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Notes:

1) Depreciation is a non-cash expense and will therefore, not be included in the selling and administrative costs.

2) The amount of borrowing in the first quarter is equal to the difference between the value of Excess (Deficiency) of Cash Available over Disbursements ($12,624) and Minimum Cash Balance Required ($26,300).

3) The value of repayment in second quarter is equal to the value of borrowing in the first quarter ($13,676) along with interest payment ($210) made in second quarter.