Fayette Medical had a cash balance of $16,000 on January 1. The company desires
ID: 2590092 • Letter: F
Question
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.)
January February March $240,000 $232,000 $272,000 Cash receipts Cash payments For inventory purchases For S&A; expenses 220,000 164,000 190,000 62,000 64,00054,000Explanation / Answer
Cash Budget January February March Beginning Cash Balance 16000 11200 10000 Add : Receipts 240000 232000 272000 Cash available 256000 243200 282000 Less : Cash payments For Inventory purchases 220000 164000 190000 for S & A expenses 62000 64000 54000 Interest expense per month 800 1180 1140 surplus(Shortage) -26800 14020 36860 Total budgeted payment 282800 229180 245140 Payment minus receipts 42800 -2820 -26860 Financing activity Line credit balance 118000 113980 87120 Ending cash balance 11200 10000 10000
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