Prepare a cash budget for Aztec Home Health agency for the months of May, June,
ID: 2772668 • Letter: P
Question
Prepare a cash budget for Aztec Home Health agency for the months of May, June, and July. The firm wishs 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. The firm collects 30% of its revenue in the month viliiling occured, 30% in the next mont, and 25% in the following month. The firm ails to collect 15% of its revenue because either bad debt or contractual allowances. Expense budget relationships are presented in the following.
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 Eight percent of payroll expense is paid in the month this expense was incurred, and 20% is paid in the following month reported. A.Determine during which months Aztec can invest surplus funds and during which months it might need to borrow. B. Build the cash budget , then build the sections of the cash budget using the relationship in the problem
Table 23-8 Revenues for Aztec 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
Explanation / Answer
Answer:
Annexures:
May June July Revenue 700000 800000 1000000 Cash Budget for the month of May June July Opening balance 220000 200000 200000 Add: Revenue collections -annex 540000 600000 715000 A: Total amount available 760000 800000 915000 Less: Expenses paid Payroll - annexure 390000 440000 530000 Supplies 70000 80000 100000 Rent 50000 50000 50000 Less: Debt services 150000 Less: Capital expenditure 75000 Closing balance required 200000 200000 200000 B: Total amount paid+closing balance 710000 845000 1030000 Surplus Amount investible (A-B) 50000 Amount required to be borrowed(B-A) 45000 115000