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month. All other items are paid in the month reported. Determine during which months Pasadena Home Health can invest surplus funds and during which months it might need to borrow. Please show your calculations and how to create a cash budget table

month. All other items are paid in the month reported. Determine during which months Pasadena Home Health can invest surplus funds and during which months it might need to borrow. Please show your calculations and how to create a cash budget table

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Prepare a cash budget to Pasadena Home Health Agency for the months of May, June, and July. The company wishes to maintain a $200, 000 minimum cash balance during the period, and it presently has a $220, 000 balance as of April 30. Revenues are presented in the table below. Revenues for Pasadena Home Health Agency January $500,000 February $500,000 March $600,000 April $600,000 May $700, 000 June $800, 000 July $1,000,000 August $ 1,000,000 The agency collects 30% of its revenue in the month billing occurred, 30% in the next month, and 25% in the following month. The agency fails to collect 15% of its revenue because of either bad debt or contractual allowances. Expense budget relationships are presented below: Payroll = $50,000 per month plus 0.50 x revenues Supplies = 0.10 x revenues Rent = $50,000 per month Debt service = $150,000 in July Capital expenditures $75,000 in June Eighty percent of payroll expense is paid in the month this expense was incurred, and 20% is paid in the following month. Supplies expense is paid in the following month. All other items are paid in the month reported. Determine during which months Pasadena Home Health can invest surplus funds and during which months it might need to borrow. Please show your calculations and how to create a cash budget table =
Transcribed Image Text:Prepare a cash budget to Pasadena Home Health Agency for the months of May, June, and July. The company wishes to maintain a $200, 000 minimum cash balance during the period, and it presently has a $220, 000 balance as of April 30. Revenues are presented in the table below. Revenues for Pasadena Home Health Agency January $500,000 February $500,000 March $600,000 April $600,000 May $700, 000 June $800, 000 July $1,000,000 August $ 1,000,000 The agency collects 30% of its revenue in the month billing occurred, 30% in the next month, and 25% in the following month. The agency fails to collect 15% of its revenue because of either bad debt or contractual allowances. Expense budget relationships are presented below: Payroll = $50,000 per month plus 0.50 x revenues Supplies = 0.10 x revenues Rent = $50,000 per month Debt service = $150,000 in July Capital expenditures $75,000 in June Eighty percent of payroll expense is paid in the month this expense was incurred, and 20% is paid in the following month. Supplies expense is paid in the following month. All other items are paid in the month reported. Determine during which months Pasadena Home Health can invest surplus funds and during which months it might need to borrow. Please show your calculations and how to create a cash budget table =
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