The management of West Valley Memorial Hospital needs to prepare a cash budget for July
2006. The following information is available:
a. The cash balance on July 1, 2006, is $236,000.
b. Actual services performed during May and June and projected services for July are:
May June July
Cash services (bills paid by individuals
as they leave the hospital) . . . . . . . . . . . . . . . . . . $110,000 $ 90,000 $120,000
Credit services (bills paid by insurance
companies and Medicare) . . . . . . . . . . . . . . . . . . 900,000 1,000,000 875,000
Credit sales are collected over a 2-month period, with 60% collected during the month the
service is performed and 40% in the following month.
c. Hospital personnel plan to purchase $80,000 of supplies during July on account. Accounts
payable are usually paid one-half in the month of purchase and one-half in the following
month. The accounts payable balance on July 1, 2006, is $35,000.
d. Salaries and wages paid during July will be approximately $600,000. (Ignore income and
other tax withholdings.)
e. Depreciation on the hospital and equipment for July will be $100,000.
f. A short-term bank loan of $80,000 (including interest) will be repaid in July.
g. All other cash expenses for July will total $56,000.
Prepare the hospital's July cash budget.
See Excel attached
West Valley Memorial Hospital
Cash Budget for July 2006 July
Opening cash, July 1, 2006 236,000
Cash sources during July
A standard cash flow budget format is presented in Excel for the West Valley Mem Hospital. Explanations are provided where necessary to explain amounts.