Kinnion Medical Clinic has budgeted the following cash flows. January, February,
ID: 2349533 • Letter: K
Question
Kinnion Medical Clinic has budgeted the following cash flows.January, February, March
Cash receipts $100,000 $106,000 $126,000
Cash payments
For inventory purchases 90,000 72,000 85,000
For S&A expenses 31,000 32,000 27,000
Kinnion Medical had a cash balance of $8,000 on January 1. The company desires to maintain a cash cushion of $5,000. Funds are assumed to be borrowed, in increments of $1,000, and repaid on the last day of each month; the interest rate is 1 percent per month. Kinnion pays its vendor on the last day of the month also. The company had a monthly $40,000 beginning bal-ance in its line of credit liability account from this year
Explanation / Answer
January February March Cash Receipts 100,000 106,000 126,000 Cash Payments Inventory 90,000 72,000 85,000 S&A expenses 31,000 32,000 27,000 Cash Budget January February March Opening Cash 8,000 5,000 7,000 Receipts 100,000 106,000 126,000 Interest expense 182 - - Payments 121,000 104,000 112,000 Ending Cash before cusion (13,182) 7,000 21,000 Cash cushion 5,000 5,000 5,000 Borrowed 18,182 - - Repaid (18,182) - - Ending Cash after cusion 5,000 7,000 21,000
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