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Finance: Cash Budgeting for West Valley Mem Hospital

Cash Budgeting?Hospital
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.

Solution Preview

See Excel attached

West Valley Memorial Hospital
Cash Budget for July 2006 July

Opening cash, July 1, 2006 236,000

Cash sources during July
Cash ...

Solution Summary

A standard cash flow budget format is presented in Excel for the West Valley Mem Hospital. Explanations are provided where necessary to explain amounts.

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