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Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins
Edition 7ISBN: 978-0077733773Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins
Edition 7ISBN: 978-0077733773 Exercise 29
Cash Budgeting: Not-for-Profit (NFP) Context (contributed by Helen M. Savage) Tri-County Social Service Agency is a not-for-profit organization in the Midwest. Use the following information to complete the cash budget for the year ending December 31, 2016.
• The Board of Trustees requires that Tri-County maintain a minimum cash balance of $8,000.
• If cash is short, the agency may borrow from an endowment fund the amount required to maintain the $8,000 minimum. (An "endowment fund" is an investment fund set up by a nonprofit entity [e.g., church, university, or hospital] and used either for ongoing operations or for purposes specified by the donor(s) to the fund. Such donations are generally tax deductible for the donors.) Repayment must be made as soon as possible. No interest is charged.
• It is anticipated that the year 2016 will begin with an $11,000 cash balance.
• Contract revenue is received evenly during the year.
• Mental health income is expected to grow by $5,000 in the second and third quarters; no change is expected in the fourth quarter.
Required
1. Within the context of a not-for-profit organization, what is an endowment fund
2. Complete the cash budget for 2016, for each quarter and the year as a whole, using the template that follows.
3. Determine the amount that the agency will owe the endowment fund at year-end.
4. Does the borrowing indicate a problem What options would the agency have to increase revenues
5. Do you think that a requirement to pay interest on the borrowings would have a positive impact on the agency's activities Why or why not
![Cash Budgeting: Not-for-Profit (NFP) Context (contributed by Helen M. Savage) Tri-County Social Service Agency is a not-for-profit organization in the Midwest. Use the following information to complete the cash budget for the year ending December 31, 2016. • The Board of Trustees requires that Tri-County maintain a minimum cash balance of $8,000. • If cash is short, the agency may borrow from an endowment fund the amount required to maintain the $8,000 minimum. (An endowment fund is an investment fund set up by a nonprofit entity [e.g., church, university, or hospital] and used either for ongoing operations or for purposes specified by the donor(s) to the fund. Such donations are generally tax deductible for the donors.) Repayment must be made as soon as possible. No interest is charged. • It is anticipated that the year 2016 will begin with an $11,000 cash balance. • Contract revenue is received evenly during the year. • Mental health income is expected to grow by $5,000 in the second and third quarters; no change is expected in the fourth quarter. Required 1. Within the context of a not-for-profit organization, what is an endowment fund 2. Complete the cash budget for 2016, for each quarter and the year as a whole, using the template that follows. 3. Determine the amount that the agency will owe the endowment fund at year-end. 4. Does the borrowing indicate a problem What options would the agency have to increase revenues 5. Do you think that a requirement to pay interest on the borrowings would have a positive impact on the agency's activities Why or why not](https://storage.examlex.com/SM1607/11eb9774_1780_5967_a72e_8faaa1400823_SM1607_00.jpg)
• The Board of Trustees requires that Tri-County maintain a minimum cash balance of $8,000.
• If cash is short, the agency may borrow from an endowment fund the amount required to maintain the $8,000 minimum. (An "endowment fund" is an investment fund set up by a nonprofit entity [e.g., church, university, or hospital] and used either for ongoing operations or for purposes specified by the donor(s) to the fund. Such donations are generally tax deductible for the donors.) Repayment must be made as soon as possible. No interest is charged.
• It is anticipated that the year 2016 will begin with an $11,000 cash balance.
• Contract revenue is received evenly during the year.
• Mental health income is expected to grow by $5,000 in the second and third quarters; no change is expected in the fourth quarter.
Required
1. Within the context of a not-for-profit organization, what is an endowment fund
2. Complete the cash budget for 2016, for each quarter and the year as a whole, using the template that follows.
3. Determine the amount that the agency will owe the endowment fund at year-end.
4. Does the borrowing indicate a problem What options would the agency have to increase revenues
5. Do you think that a requirement to pay interest on the borrowings would have a positive impact on the agency's activities Why or why not
Explanation
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Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins
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