Question

Newman Medical Clinic has budgeted the following cash flows. January February March Cash receipts $ 110,000 $ 116,000 $ 136,000 Cash payments For inventory purchases 95,000 77,000 90,000 For S&A expenses 36,000 37,000 32,000 Newman Medical had a cash balance of $13,000 on January 1. The company desires to maintain a cash cushion of $9,000. Funds are assumed to be borrowed, in increments of $1,000, and repaid on the last day of each month; the interest rate is 2 percent per month. Repayments may be made in any amount available. Newman 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. (Any repayments/shortage should be indicated with a minus sign. Round your answers to the nearest whole dollar amount.)

Cash Budget	January	February	March
Cash available
Less: Cash payments
Total budgeted payments
Payments minus receipts
Financing Activity

Answer 1

Cash Budget	January	February	March
Beginning cash balance	13000	9,200	9,000
Add: Cash recipt	110000	116000	136000
Cash available	123000	125200	145000
Less: Cash payments
For S &A Expanses	36000	37000	32000
For Inventory Purchase	95000	77000	90000
For Interest expses of the month	800	1160	1139
Total budgeted payments	131800	115160	123139
Payments minus receipts
Surplus / (shortage)	-8800	10040	21861
Financing Activity
Borrowing / (repayment)	18,000	-1040	-12861
Ending balance	9,200	9,000	9,000

Working notes for the above answer is as under