Question

E6-34 (similar to) Health World is a retail store selling home oxygen equipment. Health World also services home oxygen equipn due to a recent advertising campaign. The forecast of sales and service revenue for March-June 2018 is as fc (Click the icon to view the forecast of sales and service revenue.) (Click the icon to view the coll Read the requirements. Requirement 1. Calculate the cash that Health World expects to collect in May and in June 2018. Show calcu Start by showing the cash collections of sales revenue, then complete the schedule by entering in the service for a certain month, select "0%" in the "Collection %" column and enter a "0" in the appropriate May or June Gross Expected Revenue Collection % April Sales revenue: April sales revenue collected in Apr May sales revenue collected in May June sales revenue collected in June

Answer 1

Refer the below images for the above asked questions, in a detailed way of solution with explanation.

Requixement that The April cast May to collect health world can June is calculated during expect below: particulars April June $8730 from sales revenue (credit cards): April (49000 x 0.97) May ($8700x 0.97) June ($ 97004 0.97) $8439 $9409 $1840 $ 3060 from Service Revenues. From March (146004 4ot.) from April ($5look 601 467) From May ( 45600% 60% 406) from June (& 61004 6510) Goral collections $2040 $ 3360 $2240 . &3660 $13630 $13839 $15309 Reasurement (a) Beginning Balance $450 + collections & 13839 (May) - Expenditures & 13000 = $ 1289 yes, thealth world will be able to cover the budgeted expenditures and maintain a minirom ending balance of more than $290.

May Revenue decrease particulars original numbers May costs increase 31- 1041 Beginning cash collections Cash costs Total & 450 9 13839 $ 13000 & 450 4126599 813000 $450 $ 13939 t - $ 13650b & 639 91289 $ 169 i Note: a) from requirement ! $7595 = $84394.90 ( Revenue decrease by 101.) 12040 = $ 2040 (: sales of April are not affected) $3024 = $3360 4.90 (1: Revenue decrease by 10t.) $12659 b) 13000 + (1.3000 0.05) -$13650 ( cost increase by ry) * It may revenues decrease by tot treath world would have to borrow & 181 (1290- $109) in order to maintain an ending balance of $29o. & It to may costs borrow increase by 5 t. money since the it would not be necessary ending balance exceeds $290.

Requiremerst Health world managers prepare a cast budget in addition to the operating income budget to plan cast Hows to ensure that the company had adequate cash to pay vendors, meet payroll, and pay operating expenses as these payments come due. Health world could be very profitable on an accrual accounting basis, but the pattern of cash reccepts from revenues might be delayed and result in insufficient cash being available to make Scheduled payments for its expenses. Heath world managers may then need to initiate a plan to borrow money to finance any Shortfall. Building a profitable operating plan does not guarantee that adequate cash will be available, so Health world's managers need to prepare a cash budget in addition to an operating income budget.