a) Suppose the Government of Canada buys $12 million worth of equipment from private firms and pays for that purchase with cheques draw from its bank account at the Bank of Canada (BOC). After the private firms have deposited the government cheques in the commercial banking sector and the commercial banks have presented the cheques to the BOC, use a separate balance sheet for the BOC and the commercial banking sector to show the changes. (b) In a separate transaction suppose the commercial banks repay a loan to the BOC worth $15 million. Use a separate balance sheet for the BOC and the commercial banks to show the changes to their respective balance sheets as a result of this action. (c) As a result of the actions in part (a) and part (b) what is the combined effect on settlement balances held by Canadian commercial banks at the BOC? Show in a balance sheet for the Canadian commercial banks.
Related questions
Using the following data, prepare a cash budget for Plains Medical Center for Fiscal 2018. You can assume that the Medical Center started the fiscal year with $7,264,871 in cash on its balance sheet.
Once you compile that budget consider the following issues:
Assume the Medical Center wishes to keep a minimum cash balance each month that equals one month of salary expense plus one month of salary and other expenses. In addition, they are required to keep one year's worth of debt service payments in cash on hand each month. So your minimum cash balance must be the sum of those salary/expense items noted here, plus one year of debt payments. What is the minimum cash balance that Plains Medical Center should keep each month based on these assumptions?
Look at your cash budget calculations. Are there any months where the cash balance in that month falls below that minimum? If so, what management actions can you take to address this issue? Be specific!
| Plains Medical Center | |||||||||||
| Cash Budgeting Data | |||||||||||
| Fiscal Year 2018 (7/1/17-6/30/18) | |||||||||||
| Estimated Patient Billings (at expected collection amount) | |||||||||||
| July | $7,219,178 | ||||||||||
| August | 7,219,178 | ||||||||||
| September | 6,986,301 | ||||||||||
| October | 7,219,178 | ||||||||||
| November | 6,986,301 | ||||||||||
| December | 7,219,178 | ||||||||||
| January | 7,219,178 | ||||||||||
| February | 6,520,548 | ||||||||||
| March | 7,219,178 | ||||||||||
| April | 6,986,301 | ||||||||||
| May | 7,219,178 | ||||||||||
| June | 6,986,301 | ||||||||||
| Total | $85,000,000 | ||||||||||
| 50% of billings go to government payers, 40% to commercial payers, and 10% are self-pay accounts | |||||||||||
| The historic timing of collections looks like this: | |||||||||||
| Government | Commercial | Self-Pay | |||||||||
| Month of service | 15% | 10% | 2% | ||||||||
| Month following service | 50% | 45% | 10% | ||||||||
| Second month following service | 15% | 15% | 10% | ||||||||
| Third month following service | 10% | 15% | 10% | ||||||||
| Fourth month following service | 5% | 10% | 8% | ||||||||
| Uncollectable | 5% | 5% | 60% | ||||||||
| Total | 100% | 100% | 100% | ||||||||
| You can assume that billings increased by 5% each month from year to year, so you can use March 2017/1.05 as a part of estimating collections for July 2018 | |||||||||||
| Salaries for each month are estimated at $2,250,000 + 20% of that month's billings. | |||||||||||
| * Payments for Salaries are 50% of the current month estimate + 50% of the prior month's estimate | |||||||||||
| * Hourly employees are given a 5% bonus at Christmas (paid during December) totaling 10% of estimated salaries for December | |||||||||||
| Supply purchases are estimated at 17.5% of the billings in that month | |||||||||||
| * Payments for supplies are made in total in the following month | |||||||||||
| Other operating expense purchases are estimated at 12.5% of the billings in that month | |||||||||||
| * Payments for other expenses are made in total in the following month | |||||||||||
| The hospital was constructed using $18,000,000 in debt, payable in monthly installments over 25 years at 6% annual interest | |||||||||||
| It recognizes $445,000 in straight line depreciation expense each month. Depreciation is not funded. | |||||||||||
| The Board of Directors has approved the following Capital Expenditure budget for Fiscal 2018: | |||||||||||
| Item | Cost | Projected Purchase Date | |||||||||
| Lab Chemistry Analyzer | $250,000 | 9/30/17 | |||||||||
| Replace CT Scanner | 1,050,000 | 11/30/17 | |||||||||
| Replace two Anesthesia Machines | 775,000 | 4/30/18 | |||||||||
| Total | $2,075,000 | ||||||||||
