Please help me with this question! I am not sure If I am doing right. I tried to

Question

Please help me with this question! I am not sure If I am doing right. I tried to finish January but I am confused.

Fayette Medical Clinic has budgeted the following cash flows:

Fayette Medical had a cash balance of $16,000 on January 1. The company desires to maintain a cash cushion of $10,000. Funds are assumed to be borrowed, in increments of $2,000, 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. Fayette pays its vendors on the last day of the month also. The company had a monthly $80,000 beginning balance in its line of credit liability account from this year’s quarterly results.

Required

Prepare a cash budget. (Any repayments/shortage should be indicated with a minus sign. Round intermediate and final answers to the nearest whole dollar amounts.)

January February March Cash receipts $ 240,000 $ 232,000 $ 272,000 Cash payments For inventory purchases 220,000 164,000 190,000 For S&A expenses 62,000 64,000 54,000

Explanation / Answer

Prepare a cash budget. (Any repayments/shortage should be indicated with a minus sign. Round intermediate and final answers to the nearest whole dollar amounts.)

Cash Budget January February March Beginning cash balance $16,000 11200 10000 Add: Cash receipts 240,000 232000 272000 Cash available 256,000 243200 282000 Less: Cash payments For inventory purchases 220,000 164000 190000 For S&A expenses 62,000 64000 54000 Interest expense per month 800 1180 1140 Total budgeted payments 282,800 229180 245140 Payments minus receipts Surplus (shortage) (26,800) 14020 36860 Financing Activity Borrowing (repayment) 38000 (4020) (26860) Ending cash balance 11200 10000 10000

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