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    Schedule of budgeted cash receipts

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    A (only one part)
    Cash Budgeting for a Hospital Highline Hospital provides a wide range of health services in its community. Highline's board of directors has authorized the following capital expenditures:

    Intra-aortic balloon pump $1,400,000
    Computed tomographic scanner 850,000
    X-ray equipment 550,000
    Laboratory equipment 1,200,000
    Total $4,000,000

    The expenditures are planned for October 1, 20X7, and the board wishes to know the amount of borrowing, if any, necessary on that date. Rebecca Singer, hospital controller, has gathered the following information to be used in preparing an analysis of future cash flows. Billings, made in the month of service, for 20X7 are shown below, with actual amounts for January through June and estimated amounts for July through December:

    Month Actual Amount
    January $5,300,000
    February 5,300,000
    March 5,400,000
    April 5,400,000
    May 6,000,000
    June 6,000,000
    July (estimated) 5,800,000
    Aug (estimated) 6,200,000
    Sept (estimated) 6,600,000
    Oct. (estimated) 6,800,000
    Nov (estimated) 7,000,000
    Dec (estimated) 6,600,000

    Ninety percent of Highline billings are made to third parties, such as BlueCross, federal or state governments, and private insurance companies. The remaining 10% of the billings are made directly to patients. Historical patterns of billing collections are:

    Third-Party Billings Direct-Patient Billings
    Month of service 20% 10%
    Month following service 50 40
    Second month following service 20 40
    Uncollectible 10 10

    Singer expects the same billing and collection patterns that have been experienced during the first six months of 20X7 to continue during the last six months of the year. The following schedule presents the purchases that have been made during the past three months and the planned purchases for the last six months of 20X7.

    Month Amount
    April $1,300,000
    May 1,450,000
    June 1,450,000
    July 1,500,000
    August 1,800,000
    September 2,200,000
    October 2,350,000
    November 2,700,000
    December 2,100,000

    All purchases are made on account, and accounts payable are remitted in the month following the purchase.

    ? Salaries for each month during the remainder of 20X7 are expected to be $1,800,000 per month plus 20% of that month's billings. Salaries are paid in the month of service.
    ? Highline's monthly depreciation charges are $150,000.
    ? Highline incurs interest expenses of $180,000 per month and makes interest payments of $540,000 on the last day of each calendar quarter.
    ? Endowment fund income is expected to continue to total $210,000 per month.
    ? Highline has a cash balance of $350,000 on July 1, 20X7, and has a policy of maintaining a minimum end-of-month cash balance of 10% of the current month's purchases.
    ? Highline Hospital employs a calendar-year reporting period.

    1. Prepare a schedule of budgeted cash receipts by month for the third quarter of 20X7.

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    The solution explains how to prepare a schedule of budgeted cash receipts