Wahoo Clinic provided you with the following information. Prepare a cash budget

Question

Wahoo Clinic provided you with the following information. Prepare a cash budget for the quarter ending December, 2010 and for the months October through December 2010. Assumptions: a. Revenues: Actual Patient Projected Patient Projected Patient Revenues 2010 Revenues 2010 Revenues 2011 Jul. $1,400,000 Oct. $1,500,000 Jan $1,700,000 Aug. $1,500,000 Nov. $1,600,000 Feb $1,300,000 Sept. $1,300,000 Dec. $1,700,000 Mar $1,200,000 b. Patient revenues are collected as follows: 60% month of service 30% 1 month after service 10% 2 months after service c. “Other revenues” include all other revenues including interest earned, and are forecasted to be: October $44,000 November $55,000 December $52,000 d. Projected cash outflows: October $1,199,000 November $1,263,800 December $1,390,600 January $855,000 e. The ending cash balance for September was $200,000. f. Wahoo Clinic requires a month-end cash balance equal to 40% of the following month’s forecasted cash outflows.

Explanation / Answer

Answer: Cash budget:

Wahoo Clinic Cash Budget Particulars July Aug Sep Oct NOV Dec Revenue 1400000 1500000 1300000 1500000 1600000 1700000 Collection of Revenue: 60% month of service 840000 900000 780000 900000 960000 1020000 30% in 1 month after the service 420000 450000 390000 450000 480000 10% in 2 month after the service 140000 150000 130000 150000 Total cash Receipts 840000 1320000 1370000 1440000 1540000 1650000 Other Revenue 44000 55000 52000 Total collection (A) 840000 1320000 1370000 1484000 1595000 1702000 Projected cash outflow (B) 1199000 1263800 1390600 Net balance Available (A-B) 840000 1320000 1370000 285000 331200 311400 Add: opening cash 200000 485000 816200 Closing balance 485000 816200 1127600

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