Childrens Best Hope CBH provides day care services to lowinc

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

Solution

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