Finch Medical Clinic has budgeted the following cash flows: January February Mar

Question

Finch Medical Clinic has budgeted the following cash flows: January February March $106,000 $112,000 $132,000 Cash receipts Cash payments For inventory purchases 93,000 5,000 8,000 34,000 35,000 30,000 For sia expenses Finch Medical had a cash balance of $11,000 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. Finch 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 Cash available Less: Cash payments Total budgeted payments Payments minus receipts Financing Activity

Explanation / Answer

Cash Budget January February March Opening Cash Balance 11000 5000 5000 Add: Cash Reciepts 106000 112000 132000 Cash Available 117000 117000 137000 Less: Cash Payments: For Inventory Purchases 93000 75000 88000 For S&A Expense 34000 35000 30000 Total Budgeted Payments 127000 110000 118000 Payments-Reciepts -10000 7000 19000 Financing Activity Borrowing/(Repayments) 15000 -2000 -13000 Interest on Loan -280 Closing Cash Balance 5000 5000 5720 Interest on Loan Jan Borrowing 15000 Jan Borrowing-1 Month 2000 1% 20 Jan Borrowing-2 Month 13000 1% 260 280

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