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Cash Budget


Question 1 (8 marks) A hospital is expecting to have $25,000 cash in hand on 1st April 2015 and it requires you to prepare an estimate of cash position in respect of three months from April to June 2015, from the information given below: Patient services Purchases Wages Expenses February 70,000 40,000 8,000 6,000 March 80,000 50,000 8,000 7,000 April 92,000 52,000 9,000 7,000 May 100,000 60,000 10,000 8,000 June 120,000 55,000 12,000 9,000 Additional Information: (a) The hospital pays for purchases two months after the purchase. (b) 25% of patients pay in cash in the month they receive their treatment and the others pay in the following month. (c) Both wages and expenses are paid in the following month in which they are incurred. (d) Income Tax of $25,000 is to be paid in June 2015. Required: 1. Prepare a cash budget for April, May and June and also for the 3 months to 30 June. 2. Are there any changes you can suggest to improve this hospital’s cash flow?