Reference no: EM132830748

Baird Medical Clinic has budgeted the following cash flows:

                                                      Jan                 Feb               March

Cash receipts                      $102,000       $108,000          $128,000

Cash payments

For inventory purchases           91,000           73,000            86,000

For S&A expenses                 32,000             33,000             28,000

• Baird Medical had a cash balance of $9,000 on January 1. The company desires to maintain a cash cushion of $7,000. Funds are assumed to be borrowed, in increments of $1,000, and repaid on the last day of each month; the interest rate is 3 percent per month. Repayments may be made in any amount available. Baird 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.

Problem 1: Prepare a cash budget.