Please help! I have not been able to connect the dots with this problem and am having a hard time finding out how my instructor produced his answers. Please see below:
2. St. Pierce’s Hospital prepares monthly cash budgets. Some of the relevant data from operating budgets for 2008 are:
January February
Fee for Service $250,000 $245,000
Labor 100,000 93,000
Supplies 95,000 115,000
Administrative expenses 65,000 62,000
All Fees for Service’s are paid through insurance. Collections are expected to be 50% in the month of service, 30% in the first month following the service, 10% in the second month following the service and 10% in the third month following the service. 45 percent of Supplies are paid in cash in the month of purchase, 35 percent of Supplies are paid in cash in the following month of purchase and the balance due is paid in the third month following the purchase. All other items above are paid in the month incurred. Depreciation has been excluded from administrative expenses.
Other data:
The hospital’s cash balance on January 1, 2008, is expected to be $55,000. The hospital wants to maintain a minimum cash balance of $50,000. Any money borrowed to maintain minimum cash balance must be paid the following month.
Instructions
Prepare a cash budget for February (January has already been done and the answers are seen below). So you just need to fill in the February Column.
St. Pierce's Hospital
Cash Budget
For the Two Months Ending February 28, 2008
2. St. Pierce’s Hospital prepares monthly cash budgets. Some of the relevant data from operating budgets for 2008 are:
January February
Fee for Service $250,000 $245,000
Labor 100,000 93,000
Supplies 95,000 115,000
Administrative expenses 65,000 62,000
All Fees for Service’s are paid through insurance. Collections are expected to be 50% in the month of service, 30% in the first month following the service, 10% in the second month following the service and 10% in the third month following the service. 45 percent of Supplies are paid in cash in the month of purchase, 35 percent of Supplies are paid in cash in the following month of purchase and the balance due is paid in the third month following the purchase. All other items above are paid in the month incurred. Depreciation has been excluded from administrative expenses.
Other data:
- Fee for Service: October 2007 $205,000, November 2007 $220,000, and December 2007 $195,000.
- Purchases of Supplies: November 2007, $100,000 December 2007, $105,000.
- Other receipts: January – Collections of December 31, 2007, interest receivable $1,500;
- Other disbursements: January – payment of $10,000 for land.
The hospital’s cash balance on January 1, 2008, is expected to be $55,000. The hospital wants to maintain a minimum cash balance of $50,000. Any money borrowed to maintain minimum cash balance must be paid the following month.
Instructions
Prepare a cash budget for February (January has already been done and the answers are seen below). So you just need to fill in the February Column.
St. Pierce's Hospital
Cash Budget
For the Two Months Ending February 28, 2008
| January | February | ||||
| Beginning cash balance............................................................ Add: Receipts Collections from customers......................................... Interest receivable........................................................ Sale of securities.......................................................... Total receipts........................................................ Total available cash................................................................... | $ 55,000 226,000 1,500 0000,000 227,500 282,500 | ||||
| Less: Disbursements Supplies................................................................. Labor...................................................................... Administrative expenses...................................... Purchase of land..................................................... Total disbursements........................................ Excess (deficiency) of available cash over disbursements............................................................... Financing Borrowings..................................................................... Repayments.................................................................... Ending cash balance................................................................. | 99,500 100,000 65,000 10,000 274,500 8,000 42,000 0 $50,000 |