Prepare a cash budget to Pasadena Home Health Agency for the months of May, June, and July. The company wishes to maintain a $$200,000$ minimum cash balance during the period, and it presently has a $$220,000$ balance as of April $30.$ Revenues are presented in the table below.

Revenues for Pasadena Home Health Agency

January $$500,000$

February $$500,000$

March $$600,000$

April $$600,000$

May $$700,000$

June $$800,000$

July $$1,000,000$

August $$1,000,000$

The agency collects $30\%$ of its revenue in the month billing occurred, $30\%$ in the next month, and $25\%$ in the following month. The agency fails to collect $15\%$ of its revenue because of either bad debt or contractual allowances. Expense budget relationships are presented below:

Payroll $=$ $$50,000$ per month plus $0\mathrm{.}50$ x revenues

Supplies $=0\mathrm{.}10$ x revenues

Rent $=$ $$50,000$ per month

Debt service $=$ $$150,000$ in July

Capital expenditures $=$ $$75,000$ in June

Eighty percent of payroll expense is paid in the month this expense was incurred, and $20\%$ is paid in the following month. Supplies expense is paid in the following month. All other items are paid in the month reported. Determine during which months Pasadena Home Health can invest surplus funds and during which months it might need to borrow. Please show your calculations and how to create a cash budget table

Answer rating: 100% (QA)

To prepare a cash budget for Pasadena Home Health Agency for the months of May June and July well need to calculate the expected cash inflows and outf... View the full answer