Children\'s Best Hope (CBH) provides day care services to low-income families. C
ID: 2606542 • Letter: C
Question
Children's Best Hope (CBH) provides day care services to low-income families. CBH bills the state for its services under a service contract. Billings for the first 4 months of 2017 are anticipated to be as follows: 2-22. January February March April $220,000 $200,000 $240,000 $230,000 CBH finds that it collects 25 percent of the amounts billed in the month of service with the balance collected in the month following service. CBH is planning to acquire a new building as an additional site for its services in March 2017. The full $250,000 purchase cost of the building will be financed with a mortgage loan CBH anticipates a February 28, 2017, cash balance of $26,000. CBH anticipates the following expenses and disbursements for the month of March 2017: Payroll payments 170,000 Personnel expenses 160,000 Payments to suplers $45,000 Supplies expense $ 48,000 Depreciation expense S 12000 Interest expense 6,000
Explanation / Answer
Answer:
We have been provided with the information that,
Billings
January
February
March
April
220,000
200,000
240,000
230,000
and collection for any month is as under
Collections as % of Billings
Month of Service
Month After Service
25%
75%
First of all we will prepare the operating budget as under for the month of the march
Operating Budget
March $
Total Revenue
240,000
Expenses
Payroll
170,000
Supplies
48,000
Depreciation
12,000
Interest
6,000
Total Expenses
236,000
Profit/(Loss)
4,000
Now we will prepare the capital budget as under for the month of the march
Capital Budget
Buidling Acquisition
$ 250,000
Mortgage Loan
250000
Now we will prepare the cash budget as under for the month of the march
Cash Budget
March
Beginning Balance
$ 26,000
Cash Receipts
February Billings
150,000
March Billings
60,000
Total Collections
210,000
Total Cash Available
236,000
Disbursements
Payroll Payment
170,000
Supply Payments
48,000
Building Acquisition
0
Total Disbursements
218,000
Cash Surplus/(Shortfall)
18,000
Borrowing/(Repayment)
0
Ending Cash Balance
$ 18,000
Billings
January
February
March
April
220,000
200,000
240,000
230,000
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