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    Finance: Cash Budgeting for West Valley Mem Hospital

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    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.

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    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.

    $2.19

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