Bentfield Health Center provides a variety of medical services. The company is p
ID: 2585319 • Letter: B
Question
Bentfield Health Center provides a variety of medical services. The company is preparing its cash budget for the upcoming third quarter. The following transactions are expected to occur:
a.
Cash collections from services in July, August, and September, are projected to be $91,000, $151,000,
and $124,000respectively.
b.
Cash payments for the upcoming third quarter are projected to be $142,000 in July, $103,000
in August, and $133,000 in September.
c.
The cash balance as of the first day of the third quarter is projected to be $31,000.
d.
The health center has a line of credit with the local bank that allows it to borrow funds in months that it would not otherwise have its minimum balance. If the company has more than its minimum balance at the end of any given month, it uses the excess funds to pay off any outstanding line of credit balance. Each month, Bentfiel Health Center pays interest on the priormonth's line of credit ending balance. The actual interest rate that the health center will pay floats since it is tied to the prime rate. However, the interest rate paid during the budget period is expected to be 2% of the prior month's line of credit ending balance (if the company did not have an outstanding balance at the end of the prior month, then the health center does not have to pay any interest). All line of credit borrowings are taken or paid off on the first day of the month. As of the first day of the third quarter, Bentfield Health Center did not have a balance on its line of credit.
Requirement
Prepare a combined cash budget for Bentfield Health Center for the third quarter, with a column for each month and for the quarter total.
a.
Cash collections from services in July, August, and September, are projected to be $91,000, $151,000,
and $124,000respectively.
b.
Cash payments for the upcoming third quarter are projected to be $142,000 in July, $103,000
in August, and $133,000 in September.
c.
The cash balance as of the first day of the third quarter is projected to be $31,000.
d.
The health center has a policy that it must maintain a minimum cash balance of$25,000.Explanation / Answer
Prepare a combined cash budget for Bentfield Health Center for the third quarter, with a column for each month and for the quarter total.
July August September Quarter Beginning Cash 31000 25000 27100 31000 Cash collection from customer 91000 151000 124000 366000 Total cash available 122000 176000 151100 397000 Cash payment 142000 103000 133000 378000 Interest payment 900 900 Excess(Deficiency) over disbursement (20000) 72100 18100 18100 Borrow (repayment) 45000 (45000) 6900 6900 Ending cash balance 25000 27100 25000 25000Related Questions
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