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CHAPTER 15 UHFM 7TH EDITION PROBLEM 2 Must show wor James Buchanan Orthotics and Prosthetics is planning to request a line of credit from its
CHAPTER 15 UHFM 7TH EDITION
| PROBLEM 2 Must show wor | |||||||||
| James Buchanan Orthotics and Prosthetics is planning to request a line of credit from its bank. | |||||||||
| The company has produced sales estimates, and these appear in the worksheet below. Collection | |||||||||
| estimates are as follows: 10 percent within the month of sale, 75 percent in the month following | |||||||||
| the sale, and 15 percent in the second month following the sale. Labor and supplies estimates also | |||||||||
| appear in the worksheet below. Payments for labor and supplies are typically made during the | |||||||||
| month following the one in which these costs have been incurred. General and administrative | |||||||||
| salaries will amount to approximately $27,000 a month; lease payments under long-term lease | |||||||||
| contracts will be $9,000 a month; depreciation charges will be $36,000 a month; miscellaneous | |||||||||
| expenses will be $2,700 a month; income tax payments of $63,000 will be due in both September | |||||||||
| and December; and a progress payment of $180,000 on a new building must be paid in October. | |||||||||
| Cash on hand on July 1 will amount to $132,000, and a minimum cash balance of $90,000 will be | |||||||||
| maintained throughout the cash budget period. What loan will be the company require in | |||||||||
| October? | |||||||||
| ANSWER | |||||||||
| May | June | July | August | September | October | November | December | January | |
| Collections worksheet: | |||||||||
| Billed charges | $180,000 | $180,000 | $360,000 | $540,000 | $720,000 | $360,000 | $360,000 | $90,000 | $180,000 |
| Collections | |||||||||
| Within 30 days | |||||||||
| 30-60 days | |||||||||
| 60-90 days | |||||||||
| Total collections | |||||||||
| Supplies worksheet: | |||||||||
| Amount of labor and supplies | $90,000 | $90,000 | $126,000 | $882,000 | $306,000 | $234,000 | $162,000 | $90,000 | |
| Payments made for labor and supplies | |||||||||
| Net cash gain (loss): | |||||||||
| Total collections | |||||||||
| Total purchases | |||||||||
| General and administrative salaries | |||||||||
| Lease payments | |||||||||
| Miscellaneous expenses | |||||||||
| Taxes | |||||||||
| Progress payment | |||||||||
| Total payments | |||||||||
| Net cash gain/loss | |||||||||
| Borrowing/surplus summary: | |||||||||
| Cash at beginning with no borrowing | |||||||||
| Cash at end with no borrowing | |||||||||
| Target cash balance (given) | |||||||||
| Cumulative surplus cash / loan balance |
|
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Healthcare Finance: An Introduction To Accounting And Financial Management
Authors: Louis Gapenski
6th Edition
1567937411, 978-1567937411
