Question

SweeneySweeney 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:

a.	Cash collections from services in​ July, August, and​ September, are projected to be $94,000​, $158,000​, and $127,000 respectively.
b.	Cash payments for the upcoming third quarter are projected to be $149,000 in​ July, $103,000 in​ August, and $131,000 in September.
c.	The cash balance as of the first day of the third quarter is projected to be $30,000.
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 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 paid during the budget period is expected to be 3% 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.

Requirement

Prepare a combined cash budget for Sweeney Health Center for the third​ quarter, July-September, 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.)

Sweeney 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

Answer 1

Sweeney Health Center Combined Cash Budget For the Months of July through September
	JULY	AUGUST	SEPTEMBER
Beginning balance of cash	30000	25000	28500
Plus: Cash collections	94000	158000	127000
Total cash available	124000	183000	155500
Less: Cash payments	-149000	-103000	-131000
Ending cash balance before financing	-25000	80000	24500
Financing:
Plus: New borrowings	50000	0	500
Less: Debt repayments	0	-50000	0
Less: Interest payments	0	-1500   [50000*3%]	0
Ending cash balance	25000	28500	25000

Minimum balance of 25000 is required at end of each month .so Total borrowings in July = 25000 negative balance+25000 desired ending balance =50000