Fayette Medical Clinic has budgeted the following cash flows:

January February March
Cash receipts $ 240,000 $ 232,000 $ 272,000
Cash payments
For inventory purchases 220,000 164,000 190,000
For S&A expenses 62,000 64,000 54,000
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.

Cash budget

Particulars                  January      February          March

Beginning Balance  $ 16,000  $ 11,200  $ 10,000

Cash Receipts         $ 240,000  $ 232,000  $ 272,000

Cash for disbursements(y) $ 256,000  $ 243,200  $ 282,000

Less: Cash payments    

Inventories                     $ 220,000  $ 164,000  $ 190,000

S & A expenses             $ 62,000      $ 64,000  $ 54,000

Interest on line of credit   $ 800           $ 800          $ 800

Total disbursements (z)   $ 282,800  $ 228,800  $ 244,800

Excess/Deficiency x=y-z  $ (26,800)  $ 14,400  $ 37,200

Min. cash required            $ 10,000  $ 10,000  $ 10,000

Total cash needed    $ 36,800  $ (4,400)  $ (27,200)

Financing                    $ 38,000  $ -                    $ -

Interest at 1% per month                $ 380           $ 340

Balance cash before repayment  $ 14,020  $ 36,860

Repayment                           $ 4,020  $ 26,860

Ending Balance  $ 11,200  $ 10,000  $ 10,000