Chapter 14, Problem 20P

Problem 7-21A Preparing a cash budget

Fayette Medical Clinic has budgeted the following cash flows:

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. (Round all computations to the nearest whole dollar.)