Question

BentfieldBentfield

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:

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Requirement

Prepare a combined cash budget for

BentfieldBentfield

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. Use parentheses or a minus sign for negative ending cash balances.)

Bentfield Health Center

Combined Cash Budget

For the Months of July through September

July

Beginning balance of cash

Plus: Cash collections

Total cash available

Less: Cash payments

Ending cash balance before financing

Financing:

Plus: New borrowings

Less: Debt repayments

Less: Interest payments

Ending cash balance

a.	Cash collections from services in July, August, and September, are projected to be $ 91 comma 000$91,000 , $ 151 comma 000$151,000 , and $ 124 comma 000$124,000 respectively.
b.	Cash payments for the upcoming third quarter are projected to be $ 142 comma 000$142,000 in July, $ 103 comma 000$103,000 in August, and $ 133 comma 000$133,000 in September.
c.	The cash balance as of the first day of the third quarter is projected to be $ 31 comma 000$31,000.
d.	The health center has a policy that it must maintain a minimum cash balance of $ 25 comma 000$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,

BentfieldBentfield

Health Center pays interest on the prior month's line of credit ending balance. The actual interest rate that the health center will pay floats since it is tied to the prime rate. However, the interest rate paid during the budget period is expected to be

2 %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,

BentfieldBentfield

Health Center did not have a balance on its line of credit.

Answer 1

Solution:

Cash Budget - Bentfield Health Center For the month of July through September
Particulars	July	August	September	Quarter
Beginning Cash balance	$31,000.00	$25,000.00	$27,100.00	$31,000.00
Plus: Cash collections	$91,000.00	$151,000.00	$124,000.00	$366,000.00
Total Cash Available	$122,000.00	$176,000.00	$151,100.00	$397,000.00
Less - Cash Payments	$142,000.00	$103,000.00	$133,000.00	$378,000.00
Ending cash balance before financing	-$20,000.00	$73,000.00	$18,100.00	$19,000.00
Financing:
Plus: New Borrowings	$45,000.00	$0.00	$6,900.00	$51,900.00
Less: Debt Repayments	$0.00	$45,000.00	$0.00	$45,000.00
Less: Interest Payments	$0.00	$900.00	$0.00	$900.00
Ending cash balance	$25,000.00	$27,100.00	$25,000.00	$25,000.00