Mission Health Center provides a variety of medical services. The company is preparing its cash budget for the upcoming third quarter. The following transactions are expected to occur:
a. Cash collections from services in July, August, and September are projected to be $ 96,000, $ 150,000, and $ 127,000, respectively.
b. Cash payments for the upcoming third quarter are projected to be $ 141,000 in July, $ 103,000 in August, and $ 138,000 in September.
c. The cash balance as of the first day of the third quarter is projected to be $ 30,000.
d. Mission Health Center has a policy that it must maintain a minimum cash balance of $ 22,000. The company has a line of credit with the local bank that allows it to borrow funds in months that it would not otherwise have the minimum balance. If the company has more than the minimum balance at the end of any given month, it uses the excess funds to pay off any outstanding line of credit balance. Each month, Mission Health Center pays interest on the prior month’s line of credit ending balance. The actual interest rate that the health center will pay floats since it is tied to the prime rate. However, the interest rate paid during the budget period is expected to be 3% of the prior month’s line of credit ending balance ( if it did not have an outstanding balance at the end of the prior month, then the company does not have to pay any interest). All line of credit borrowings are taken or paid off on the first day of the month. As of the first day of the third quarter, Mission Health Center did not have a balance on its line of credit.
Prepare a combined cash budget for Mission Health Center for the third quarter, with a column for each month and for the quarter total.