Problem

Preparing a cash budgetKinnion Medical Clinic has budgeted the following cash flows.  ...

Preparing a cash budget

Kinnion Medical Clinic has budgeted the following cash flows.

 

January

February

March

Cash receipts

$100,000

$106,000

$126,000

Cash payments

 

 

 

For inventory purchases

90,000

72,000

85,000

For S&A expenses

31,000

32,000

27,000

Kinnion Medical had a cash balance of $8,000 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. Kinnion pays its vendor 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 all computations to the nearest whole dollar.)

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