Sweeney Health Center provides a variety of medical services. The company is pre
ID: 2511662 • Letter: S
Question
Sweeney Health Center provides a variety of medical services. The company is preparing its cash budget for the upcoming third quarter. The following transactions are expected to occur 1 (Click the icon to view the expected transactions.) Prepare a combined cash budget for Sweeney Health Center for the third quarter, with a column for each month and for the quarter total. (If a box is not used in the table leave the box empty; do not enter a zero. Usepentheses or a minus sigrn for negative ending cash balances.) Sweeney Health Center Combined Cash Budget For the Months of July through September More Info July August September Quarter Beginning balance of cash Plus: Cash collections Total cash available Less: Cash payments Ending cash balance before a. Cash collections from services in July, August, and September, are projected to be $94,000, $156,000, and $129,000 b. Cash payments for the upcoming third quarter are projected to be $148,000 in July, $109,000 in August, and $138,000 in c. The cash balance as of the first day of the third quarter is projected to be $39,000 d. The health center has a policy that it must maintain a minimum cash balance of $25,000. The health center has a line of credit with the local bank that allows it to borrow funds in months that it would not otherwise have its minimum balance. If the company has more than its minimum balance at the end of any given month, it uses the excess funds to pay off any outstanding line of credit balance. Each month, Sweeney Health Cener pays interest on the prior month's line of credit ending balance. The actual interest rate that the health center wil pay floats since it is tied to the prime rate. However, the interest paid during the budget period is expected to be 2% of the prior month's line of credit ending balance (if the company did not have an outstanding balance at the end of the prior month, then the health center does not have to pay any interest). All line of credit borrowings are taken or paid off on the first day of the month. As of the first day of the third quarter, Sweeney Health Center did not have a balance on its line of credit. financing Plus: New borrowings Less: Debt repayments Less: Interest payments Ending cash balanceExplanation / Answer
Solution:
Combined Cash Budget For the Months of July through September
July
August
September
Quarter
beginning cash balance
$39,000
$25,000
$31,200
$39,000
Plus: Cash collections
$94,000
$156,000
$129,000
$379,000
Total cash available
$133,000
$181,000
$160,200
$418,000
Less: Cash payments
$148,000
$109,000
$138,000
$395,000
Ending cash balance before financing
-$15,000
$72,000
$22,200
$23,000
Financing:
Plus: New Borrowings
$40,000
$0
$0
$40,000
Less: Debt Payments
$0
-$40,000
$0
-$40,000
Less: Interest Payments
$0
-$800
$0
-$800
Ending Cash Balance
$25,000
$31,200
$22,200
$22,200
Note – Interest Payment = $40,000 Borrowing x 2% rate of interest = $800
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Combined Cash Budget For the Months of July through September
July
August
September
Quarter
beginning cash balance
$39,000
$25,000
$31,200
$39,000
Plus: Cash collections
$94,000
$156,000
$129,000
$379,000
Total cash available
$133,000
$181,000
$160,200
$418,000
Less: Cash payments
$148,000
$109,000
$138,000
$395,000
Ending cash balance before financing
-$15,000
$72,000
$22,200
$23,000
Financing:
Plus: New Borrowings
$40,000
$0
$0
$40,000
Less: Debt Payments
$0
-$40,000
$0
-$40,000
Less: Interest Payments
$0
-$800
$0
-$800
Ending Cash Balance
$25,000
$31,200
$22,200
$22,200
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