Fayette Medical Clinic has budgeted the following cash flows: January February C

Question

Fayette Medical Clinic has budgeted the following cash flows: January February Cash receipts Cash payments $240,000 $232,000 $272,000 For inventory purchases For S&A; expenses 220,000 164,000 190,000 64,000 62,000 54,000 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.)

Explanation / Answer

Prepare Cash budget

January febuary march Beginning cash balance 16000 11200 10000 Add:cash receipts 240000 232000 272000 Total cash available 256000 243200 282000 Less: cash disbursement Inventory purchase 220000 164000 190000 S&A expenses 62000 64000 54000 Interest paid 800 1180 1140 Total cash disbursement 282800 229180 245140 Excess of cash over disbursement (26000) 14020 36860 Financing activities Borrowing 38000 Repayments (4020) (26860) Ending cash balance 11200 10000 10000

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