Deck 5: Master Budgets

Question 1

A strategic budget will be as detailed as an operating budget.

Answer 1

False

Question 2

A goal of the budgeting process is to communicate a consistent set of plans throughout the company.

Answer 2

True

Question 3

A static budget is a financial plan for a particular level of sales volume.

Answer 3

True

Question 4

Which of the following is an example of the planning function of a budget?

A) A budget demands integrated input from different business units and functions.
B) Employees are motivated to achieve the goals set by the budget.
C) Budget figures are used to evaluate the performance of managers.
D) The budget outlines a specific course of action for the coming period.

Question 5

After comparing budgets with actual results, corrective action will be taken based on the differences.

Question 6

An intentional understatement of expected revenues or overstatement of expected expenses by managers in order to have a favorable performance evaluation is known as:

A) benchmarking.
B) appropriation.
C) budgetary slack.
D) variance analysis.

Question 7

Which of the following is an example of the coordination and communication function of a budget?

A) A budget demands integrated input from different business units and functions.
B) Employees are motivated to achieve the goals set by the budget.
C) Budget figures are used to evaluate the performance of managers.
D) The budget outlines a specific course of action for the coming period.

Question 8

An operating budget is a short-term financial plan that coordinates activities to achieve short-term goals.

Question 9

A master budget is the financial plan for a specific segment of an organization.

Question 10

A budget represents the plans that a company has in place to achieve its goals.

Question 11

Which of the following statements is true of the budgeting process?

A) It includes qualitative targets of the company, not just quantitative.
B) It is a continuous process.
C) It shows the actual performance of the business.
D) Its success is not dependent on human behavior.

Question 12

Budgeted financial statements are financial statements based on budgeted amounts rather than actual amounts.

Question 13

Budgets provide a benchmark that motivates employees and helps managers evaluate performance.

Question 14

Developing a budget reduces coordination and communication at different levels in an organization.

Question 15

Budgeting requires managers to decide upon the course of action and then to plan for the same.

Question 16

A flexible budget is prepared to represent different levels of sales volume.

Question 17

All organizations use one standardized budgeting process.

Question 18

A budget is a financial plan that managers use to coordinate a business's activities.

Question 19

Which of the following is an example of the benchmarking function of a budget?

A) A budget demands integrated input from different business units and functions.
B) Budgeting requires close cooperation between accountants and operational personnel.
C) Budget figures are used to evaluate the performance of managers.
D) The budget outlines a specific course of action for the coming period.

Question 20

A strategic budget is a long-term financial plan used to coordinate the activities needed to achieve the long-term goals of the company.

Question 21

If the cost of indirect materials needed for production is insignificant, it should not be included in the budgeting process.

Question 22

Which of the following is true of the sales budget?

A) It provides sales values that are used to prepare financial statements for external reporting purposes.
B) It captures the variable and fixed expenses of the business.
C) It is used in the production budget.
D) It shows the value of expected production in a period.

Question 23

Which of the following statements is true of the operating budget?

A) It is a part of the financial budget.
B) It includes the capital expenditures budget.
C) It includes the sales revenue budget.
D) Its final component is the cash budget.

Question 24

The capital expenditures budget represents the company's plan for purchasing the long-term assets.

Question 25

Which of the following describes the cash budget?

A) It aids in planning to ensure the company has adequate inventory and cash on hand.
B) It captures the variable and fixed expenses of the business.
C) It depicts the breakdown of sales based on terms of collection.
D) It helps in planning to ensure the business has adequate cash.

Question 26

Which of the following budgets focuses on the income statement and its supporting schedules?

A) The operating budget
B) The cash budget
C) The capital expenditures budget
D) The sales budget

Question 27

The starting point in the budgeting process is the preparation of the:

A) cash budget.
B) production budget.
C) sales budget.
D) budgeted income statement.

Question 28

Which of the following statements is true of the capital expenditures budget?

A) It is a part of the financial budget.
B) It must be completed after the budgeted income statement is prepared.
C) It includes the sales budget.
D) It must be completed before the cash budget is prepared.

Question 29

The cash budget and the budgeted financial statements are collectively known as the:

A) operating budget.
B) master budget.
C) financial budget.
D) production budget.

Question 30

Components of the master budget are: the operating budget, the capital expenditures budget and the financial budget.

Question 31

The ________ details how the business expects to go from the beginning cash balance to the desired ending cash balance.

A) capital expenditures budget
B) budgeted income statement
C) cash flow statement
D) cash budget

Question 32

Which of the following describes the selling and administrative expenses budget?

A) It aids in planning to ensure the company has adequate inventory on hand.
B) It captures the variable and fixed components of selling and administrative expenses of the business.
C) It depicts the breakdown of sales based on terms of collection.
D) It helps in planning to ensure the business has adequate cash.

Question 33

The direct material budget is prepared on the basis of the:

A) cash budget.
B) master budget.
C) capital expenditure budget.
D) production budget.

Question 34

The production budget determines the number of units to be produced during the period.

Question 35

Preparation of the production budget is the first step in the preparation of operating budget.

Question 36

A manufacturer has budgeted sales for the first quarter of the next year to be 30,000 units. The inventory in hand at the beginning of quarter is 5,000 units. The desired ending inventory is 10,000 units. Calculate the budgeted production for the quarter.

A) 10,000 units
B) 35,000 units
C) 25,000 units
D) 40,000 units

Question 37

Which of the following describes the production budget?

A) It aids in planning to ensure the company has adequate inventory and cash on hand.
B) It gives the quantity of finished goods to be manufactured during a budget period.
C) It depicts the breakdown of sales on the basis of terms and conditions of collection of sales revenue.
D) It helps in planning to ensure the business has adequate cash.

Question 38

Caplico Company has prepared the following sales budget: $\begin{array}{|l|r|}\hline{\text { Month }} & \text { Budgeted Sales } \\\hline \text { March } & \$ 200,000 \\\hline \text { April } & 180,000 \\\hline \text { May } & 220,000 \\\hline \text { Tune } & 260,000 \\\hline\end{array}$ Cost of goods sold is budgeted at 60% of sales and the inventory at the end of February was $36,000. Desired inventory levels at the end of each month are 20% of the next month's cost of goods sold. What is the desired beginning inventory on June 1?

A) $52,000
B) $26,400
C) $43,200
D) $31,200

Question 39

Kapital Inc. has prepared the operating budget for the first quarter of 2015. They forecast sales of $50,000 in January, $60,000 in February, and $70,000 in March. Variable and fixed expenses are as follows: Variable: Power cost (40% of Sales)
Miscellaneous expenses: (5% of Sales)
Fixed: Salary expense: $8,000 per month
Rent expense: $5,000 per month
Depreciation expense: $1,200 per month
Power cost/fixed portion: $800 per month
Miscellaneous expenses/fixed portion: $1,000 per month

-
Calculate total selling and administrative expenses for the month of January.

A) $38,500
B) $47,500
C) $41,700
D) $43,000

Question 40

The budgeted production of Gunix Inc. is 8,000 units. Each unit requires 40 minutes of direct labor work to complete. The direct labor rate is $100 per hour. Calculate the budgeted cost of direct labor for the month.

A) $533,333.33
B) $500,000.00
C) $566,666.66
D) $633,333.33

Question 41

Nobell Inc. has a cash balance of $20,000 on April 1, 2015. They are now preparing the cash budget for the second quarter. Budgeted cash collections and payments are as follows: $\begin{array}{|l|r|r|r|} \hline&{\text { Apr }} &{\text { May }} &{\text { June }} \\\hline \text { Cash collections } & \$ 25,000 & \$ 22,000 & \$ 20,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 5,800 & 7,000 & 6,200 \\\hline \text { Operating expenses } & 3,500 & 4,600 & 5,300 \\\hline\end{array}$ There are no budgeted capital expenditures or financing transactions during the quarter.

-Based on the above data, calculate the projected cash balance at the end of June.

A) $35,700
B) $21,900
C) $46,100
D) $54,600

Question 42

The output of a cash budget is input for an operating budget.

Question 43

Dry Fruit Grocers a local grocer has budgeted inventory purchases as follows: October: $300,000
November: $350,000
December: $390,000
Dry Fruit Grocers pays for 20% of their purchases during the month of purchase, 70% during the month following the purchase, and the remaining 10% two months after the month of purchase. What is the budgeted accounts payable balance on December 31?

A) $312,000
B) $347,000
C) $390,000
D) $425,000

Question 44

For any organization, the primary source of cash is from its customers.

Question 45

Fly GenX Inc. has the following budgeted sales for the next quarter.
$$\begin{array} { | l | r | r | r | } \hline \text { Month: } & \mathbf { 1 } & \mathbf { 2 } & \mathbf { 3 } \\\hline \text { Units } & 10,000 & 11,000 & 12,000 \\\hline\end{array}$$ Inventory of finished goods on hand at the beginning of the quarter is 4,000 units. The company desires to maintain ending inventory equal to beginning inventory plus 1,000 units every month.
Calculate the quantity to be produced during the quarter.

Question 46

Diemans Corp .has provided a part of its budget for the 2^nd quarter: $\begin{array}{|l|r|r|r|} \hline& {\text { Apr }} &{\text { May }} &{\text { June }} \\\hline \text { Cash collections } & \$ 40,000 & \$ 45,000 & \$ 52,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 4,500 & 7,200 & 4,500 \\\hline \text { Operating expenses } & 7,900 & 5,600 & 9,000 \\\hline \text { Capital expenditures } & 0 & 20,000 & 4,600 \\\hline\end{array}$ The cash balance on April 1 is $12,000. Assume that there will be no financing transactions or costs during the quarter. Calculate the cash balance at the end of June.

A) $26,500
B) $40,800
C) $85,700
D) $21,800

Question 47

Nobell Inc. has a cash balance of $20,000 on April 1, 2015. They are now preparing the cash budget for the second quarter. Budgeted cash collections and payments are as follows: $\begin{array}{|l|r|r|r|} \hline&{\text { Apr }} &{\text { May }} &{\text { June }} \\\hline \text { Cash collections } & \$ 25,000 & \$ 22,000 & \$ 20,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 5,800 & 7,000 & 6,200 \\\hline \text { Operating expenses } & 3,500 & 4,600 & 5,300 \\\hline\end{array}$ There are no budgeted capital expenditures or financing transactions during the quarter.

- Based on the above data, calculate the projected cash balance at the end of April.

A) $22,000
B) $35,700
C) $23,700
D) $22,400

Question 48

Kapital Inc. has prepared the operating budget for the first quarter of 2015. They forecast sales of $50,000 in January, $60,000 in February, and $70,000 in March. Variable and fixed expenses are as follows: Variable: Power cost (40% of Sales)
Miscellaneous expenses: (5% of Sales)
Fixed: Salary expense: $8,000 per month
Rent expense: $5,000 per month
Depreciation expense: $1,200 per month
Power cost/fixed portion: $800 per month
Miscellaneous expenses/fixed portion: $1,000 per month

-
Using the information above, calculate the amount of selling and administrative expenses for the month of February.

A) $38,500
B) $47,500
C) $41,700
D) $43,000

Question 49

Nobell Inc. has a cash balance of $20,000 on April 1, 2015. They are now preparing the cash budget for the second quarter. Budgeted cash collections and payments are as follows: $\begin{array}{|l|r|r|r|} \hline&{\text { Apr }} &{\text { May }} &{\text { June }} \\\hline \text { Cash collections } & \$ 25,000 & \$ 22,000 & \$ 20,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 5,800 & 7,000 & 6,200 \\\hline \text { Operating expenses } & 3,500 & 4,600 & 5,300 \\\hline\end{array}$ There are no budgeted capital expenditures or financing transactions during the quarter.

- Based on the above data, calculate the projected cash balance at the end of May.

A) $22,000
B) $21,900
C) $23,700
D) $46,100

Question 50

Diemans Corp. has provided a part of its budget for the 2^nd quarter: $\begin{array}{|l|r|r|r|} \hline& {\text { Apr }} &{\text { May }} &{\text { June }} \\\hline \text { Cash collections } & \$ 40,000 & \$ 45,000 & \$ 52,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 4,500 & 7,200 & 4,500 \\\hline \text { Operating expenses } & 7,900 & 5,600 & 9,000 \\\hline \text { Capital expenditures } & 0 & 20,000 & 4,600 \\\hline\end{array}$ The cash balance on April 1 is $12,000. Assume that there will be no financing transactions or costs during the quarter.

- Calculate the cash balance at the end of April.

A) $50,000
B) $40,200
C) $39,600
D) $51,800

Question 51

A manufacturing company's budgeted income statement includes the following data: $\begin{array}{|l|r|r|r|l|}\hline \begin{array}{l}\text { Data extracted from budgeted } \\\text { income statement }\end{array} & \text { Mar } & \text { Apr } & \text { May } & \text { Jun } \\\hline \text { Sales } & \$ 120,000 & \$ 90,000 & \$ 95,000 & \$ 100,000\\\hline \text { Commission expense (15\% of sales) } & 18,000 & 13,500 & 14,250 & 15,000 \\\hline \text { Salaries expense } & 30,000 & 30,000 & 30,000 & 30,000 \\\hline \text { Miscellaneous expense }-4 \% \text { of sales } & 4,800 & 3,600 & 3,800 & 4,000 \\\hline \text { Rent expense } & 3,600 & 3,600 & 3,600 & 3,600 \\\hline \text { Utility expense } & 1,900 & 1,900 & 1,900 & 1,900 \\\hline \text { Insurance expense } & 2,100 & 2,100 & 2,100 & 2,100 \\\hline \text { Depreciation expense } & 4,400 & 4,400 & 4,400 & 4,400 \\\hline\end{array}$

- The budget assumes that 60% of commission expenses are paid in the month they were incurred and the remaining 40% are paid one month later. In addition, 50% of salary expenses are paid in the month incurred and the remaining 50% are paid one month later. Miscellaneous expenses, rent expense and utility expenses are assumed to be paid in the same month in which they are incurred. Insurance was prepaid for the year on January 1.
How much is the total of the budgeted cash payments for selling and administrative expenses for the month of May?

A) $54,200
B) $53,250
C) $54,400
D) $53,900

Question 52

Delleate Inc. has prepared the following purchases budget: $\begin{array}{|l|r|}\hline\text { Month } & \text { Budgeted Purchases } \\\hline \text { june } & \$ 67,000 \\\hline \text { july } & 72,500 \\\hline \text { Aurgust } & 76,300 \\\hline \text { September } & 73,700 \\\hline \text { October } & 69,200\\\hline\end{array}$ All purchases are paid for as follows: 10% in the month of purchase, 50% in the following month, and 40% two months after purchase.

-Calculate total cash payments made in October for purchases.

A) $72,630
B) $70,680
C) $70,520
D) $74,290

Question 53

Junk Fries has budgeted sales for June and July at $680,000 and $720,000, respectively. Sales are 80% credit, of which 70% is collected in the month of sale and 30% is collected in the following month. What is the accounts receivable balance on July 31?

A) $200,500
B) $172,800
C) $158,200
D) $225,320

Question 54

From the following details provided by NutShell Inc., prepare the cost of goods sold budget for the year 2015.
$$\begin{array} { l l } \text { Direct material per unit } & \$ 65 \\\text { Direct labor hours per unit } & 2 \text { hours } \\\text { Direct labor rate per hour } & \$ 50 \\\text { Manufacturing overhead cost per direct labor hour } & \$ 20 \\\text { Egginning inventory units } & 1,000 \\\text { Selling price per unit } & \$ 250\end{array}$$ $$\begin{array} { l r r r r } & \text { First } & \text { Second } & \text { Third } & \text { Fourth } \\& \text { Quarter } & \text { Quarter } & \text { Quarter } & \text { Quarter } \\\text { Budgeted units to be produced } & 15,000 & 18,000 & 21,000 & 24,000\end{array}$$ Assume that Nutshell Inc. has no closing stock at the end of each month.

Question 55

$\begin{array}{|l|r|r|r|} \hline& {\text { Apr }} &{\text { May }} &{\text { June }} \\\hline \text { Cash collections } & \$ 40,000 & \$ 45,000 & \$ 52,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 4,500 & 7,200 & 4,500 \\\hline \text { Operating expenses } & 7,900 & 5,600 & 9,000 \\\hline \text { Capital expenditures } & 0 & 20,000 & 4,600 \\\hline\end{array}$ The cash balance on April 1 is $12,000. Assume that there will be no financing transactions or costs during the quarter.

-Diemans Corp. has provided a part of its budget for the 2^nd quarter: Calculate the cash balance at the end of May.

A) $51,800
B) $40,800
C) $33,900
D) $21,800

Question 56

The capital expenditures budget is prepared before the preparation of the cash budget.

Question 57

Delleate Inc. has prepared the following purchases budget: $\begin{array}{|l|r|}\hline\text { Month } & \text { Budgeted Purchases } \\\hline \text { june } & \$ 67,000 \\\hline \text { july } & 72,500 \\\hline \text { Aurgust } & 76,300 \\\hline \text { September } & 73,700 \\\hline \text { October } & 69,200\\\hline\end{array}$ All purchases are paid for as follows: 10% in the month of purchase, 50% in the following month, and 40% two months after purchase.

-Calculate balance of Accounts payable at the end of October.

A) $77,680
B) $91,760
C) $69,330
D) $74,290

Question 58

From the following details provided by NutShell Inc., prepare the manufacturing overhead budget for the year 2015.
$$\begin{array} { l c c c c } & \text { First } & \text { Second } & \text { Third } & \text { Fourth } \\& \text { Quarter } & \text { Quarter } & \text { Quarter } & \text { Quarter } \\\text { Budgeted production units } & 15,000 & 18,000 & 21,000 & 24,000 \\\text { Variable overhead cost per unit } & \$ 45 & \$ 45 & \$ 45 & \$ 45\end{array}$$ Fixed overhead costs:
$$\begin{array} { l l l l l } \text { Depreciation } & \$ 3,000 & \$ 3,000 & \$ 3,000 & \$ 3,000 \\\text { Supplies, insurance } & 5,000 & 5,750 & 6 , 2 5 0 & 7,250 \\\text { Direct labor hours } & 12,500 & 7,500 & 17,200 & 12,800\end{array}$$ Prepare the manufacturing overhead budget for the year 2015. Also, calculate the overhead allocation rate, using direct labor hours as the allocation base.

Question 59

A manufacturing company's budgeted income statement includes the following data: $\begin{array}{|l|r|r|r|l|}\hline \begin{array}{l}\text { Data extracted from budgeted } \\\text { income statement }\end{array} & \text { Mar } & \text { Apr } & \text { May } & \text { Jun } \\\hline \text { Sales } & \$ 120,000 & \$ 90,000 & \$ 95,000 & \$ 100,000\\\hline \text { Commission expense (15\% of sales) } & 18,000 & 13,500 & 14,250 & 15,000 \\\hline \text { Salaries expense } & 30,000 & 30,000 & 30,000 & 30,000 \\\hline \text { Miscellaneous expense }-4 \% \text { of sales } & 4,800 & 3,600 & 3,800 & 4,000 \\\hline \text { Rent expense } & 3,600 & 3,600 & 3,600 & 3,600 \\\hline \text { Utility expense } & 1,900 & 1,900 & 1,900 & 1,900 \\\hline \text { Insurance expense } & 2,100 & 2,100 & 2,100 & 2,100 \\\hline \text { Depreciation expense } & 4,400 & 4,400 & 4,400 & 4,400 \\\hline\end{array}$

-The budget assumes that 60% of commission expenses are paid in the month they are incurred and the remaining 40% are paid one month later. In addition, 50% of salary expenses are paid in the same month and the remaining 50% are paid one month later. Miscellaneous expenses, rent expense and utility expenses are assumed to be paid in the same month in which they are incurred. Insurance has been paid in advance for the year on January 1^st.
Calculate total budgeted cash payments for selling and administrative expenses for the month of April.

A) $54,200
B) $53,250
C) $54,400
D) $53,900

Question 60

The cash budget is the prerequisite for the master budget.

Question 61

When a company is preparing a budgeted statement of cash flows, the payments to suppliers for purchases of inventory can be obtained from:

A) the cash budget.
B) the sales budget.
C) budgeted cash collections.
D) the budgeted balance sheet.

Question 62

A company has prepared the operating budget and the cash budget and is now preparing the budgeted balance sheet. The balance of Accounts Payable can be taken from:

A) the inventory, purchases and cost of goods sold budget.
B) the budgeted cash payments for purchases.
C) the cash budget.
D) the selling and administrative expenses budget.

Question 63

A3+ has prepared its 3rd quarter budget and provided the following data: $\begin{array}{|l|r|r|r|} \hline& {\text { Jul }} &{\text { Aug }} &{\text { Sep }} \\\hline \text { Cash collections } & \$ 50,000 & \$ 40,000 & \$ 48,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 31,000 & 22,000 & 18,000 \\\hline \text { Operating expenses } & 12,000 & 9,000 & 11,600 \\\hline \text { Capital expenditures } & 13,000 & 25,000 & 0\\\hline\end{array}$ The cash balance on June 30 is projected to be $4,000. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash.

-
How much will the company have to borrow at the end of July?

A) $0
B) $5,000
C) $15,000
D) $10,000

Question 64

A company has prepared the operating budget and the cash budget and is now preparing the budgeted balance sheet. The balance of retained earnings can be taken from:

A) the inventory, purchases and cost of goods sold budget.
B) the operating budget.
C) the cash budget.
D) the budgeted income statement plus the balance sheet from the prior year.

Question 65

Fulkron Manufacturing provides the following data excerpted from its 3rd quarter budget: $\begin{array}{|l|l|r|r|} \hline&{\text { Jul }} & \text { Aug } &{\text { Sep }} \\\hline \text { Cash collections } & \$ 66,000 & \$ 42,000 & \$ 45,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 50,000 & 48,000 & 25,000 \\\hline \text { Operating expenses } & 10,000 & 15,000 & 20,000 \\\hline \text { Capital expenditures } & 0 & 32,000 & 6,000\\\hline\end{array}$ The cash balance on June 30 is projected to be $10,000.

-Based on the above data, calculate the shortfall the company is projected to have at the end of September.

A) $43,000
B) $28,000
C) $35,000
D) $40,000

Question 66

A3+ has prepared its 3rd quarter budget and provided the following data: $\begin{array}{|l|r|r|r|} \hline& {\text { Jul }} &{\text { Aug }} &{\text { Sep }} \\\hline \text { Cash collections } & \$ 50,000 & \$ 40,000 & \$ 48,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 31,000 & 22,000 & 18,000 \\\hline \text { Operating expenses } & 12,000 & 9,000 & 11,600 \\\hline \text { Capital expenditures } & 13,000 & 25,000 & 0\\\hline\end{array}$ The cash balance on June 30 is projected to be $4,000. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash.

-
How much will the company have to borrow at the end of August?

A) $15,000
B) $5,000
C) $10,000
D) $20,000

Question 67

A3+ has prepared its 3rd quarter budget and provided the following data: $\begin{array}{|l|r|r|r|} \hline& {\text { Jul }} &{\text { Aug }} &{\text { Sep }} \\\hline \text { Cash collections } & \$ 50,000 & \$ 40,000 & \$ 48,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 31,000 & 22,000 & 18,000 \\\hline \text { Operating expenses } & 12,000 & 9,000 & 11,600 \\\hline \text { Capital expenditures } & 13,000 & 25,000 & 0\\\hline\end{array}$ The cash balance on June 30 is projected to be $4,000. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash

- Calculate the ending cash balance before financing for August.

A) $9,000
B) $5,000
C) $3,000
D) ($8,000)

Question 68

June sales were $40,000 while projected sales for July and August were $50,000 and $60,000, respectively. Sales are 40% cash and 60% credit. All credit sales are collected in the month following the sale. Calculate expected collections for July.

A) $36,000
B) $44,000
C) $50,000
D) $54,000

Question 69

Fulkron Manufacturing provides the following data excerpted from its 3rd quarter budget: $\begin{array}{|l|l|r|r|} \hline&{\text { Jul }} & \text { Aug } &{\text { Sep }} \\\hline \text { Cash collections } & \$ 66,000 & \$ 42,000 & \$ 45,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 50,000 & 48,000 & 25,000 \\\hline \text { Operating expenses } & 10,000 & 15,000 & 20,000 \\\hline \text { Capital expenditures } & 0 & 32,000 & 6,000\\\hline\end{array}$ The cash balance on June 30 is projected to be $10,000.

- Based on the above data, calculate the shortfall the company is projected to have at the end of August.

A) $32,000
B) $43,000
C) $37,000
D) $16,000

Question 70

A3+ has prepared its 3rd quarter budget and provided the following data: $\begin{array}{|l|r|r|r|} \hline&{\text { Jul }} &{\text { Aug }} &{\text { Sep }} \\\hline \text { Cash collections } & \$ 50,000 & \$ 40,000 & \$ 48,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 31,000 & 22,000 & 18,000 \\\hline \text { Operating expenses } & 12,000 & 9,000 & 11,600 \\\hline \text { Capital expenditures } & 13,000 & 25,000 & 0\\\hline\end{array}$ The cash balance on June 30 is projected to be $4,000. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash.

- Calculate the final projected cash balance at the end of September.

A) $6,000
B) $5,254
C) $6,133
D) $7,200

Question 71

Purchases for May were $100,000, while expected purchases for June and July are $110,000 and $125,000, respectively. All purchases are paid 25% in the month of purchase and 75% the following month. Calculate the budgeted payments for the month of June.

A) $102,500
B) $107,500
C) $110,000
D) $121,250

Question 72

A company has prepared the operating budget and the cash budget and is now preparing the budgeted balance sheet. The balance of Inventory can be taken from:

A) production budget and cost of goods sold budget.
B) the financial budget.
C) the cash budget.
D) the selling and administrative expenses budget.

Question 73

A3+ has prepared its 3rd quarter budget and provided the following data: $\begin{array}{|l|r|r|r|} \hline& {\text { Jul }} &{\text { Aug }} &{\text { Sep }} \\\hline \text { Cash collections } & \$ 50,000 & \$ 40,000 & \$ 48,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 31,000 & 22,000 & 18,000 \\\hline \text { Operating expenses } & 12,000 & 9,000 & 11,600 \\\hline \text { Capital expenditures } & 13,000 & 25,000 & 0\\\hline\end{array}$ The cash balance on June 30 is projected to be $4,000. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash.

- Calculate the amount of principal repayment at the end of September.

A) $5,000
B) $10,000
C) $15,000
D) $20,000

Question 74

When a company is preparing a budgeted statement of cash flows, the payments for selling and administrative expenses can be obtained from:

A) budgeted payments for purchases.
B) the sales budget.
C) the cash budget.
D) the budgeted balance sheet.

Question 75

A3+ has prepared its 3rd quarter budget and provided the following data: $\begin{array}{|l|r|r|r|} \hline& {\text { Jul }} &{\text { Aug }} &{\text { Sep }} \\\hline \text { Cash collections } & \$ 50,000 & \$ 40,000 & \$ 48,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 31,000 & 22,000 & 18,000 \\\hline \text { Operating expenses } & 12,000 & 9,000 & 11,600 \\\hline \text { Capital expenditures } & 13,000 & 25,000 & 0\\\hline\end{array}$ The cash balance on June 30 is projected to be $4,000. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash.

- Calculate the final cash balance at the end of August taking into consideration all the financing transactions.

A) $6,958
B) $5,254
C) $7,100
D) $4,320

Question 76

A company has prepared the operating budget and the cash budget and is now preparing the budgeted balance sheet. The balance of Accounts Receivable can be obtained from:

A) the inventory, purchases and cost of goods sold budget.
B) cash receipts from customers.
C) the capital expenditures budget.
D) the selling and administrative expenses budget.

Question 77

On June 30, 2015, Alpha Company's cash balance is $4,000. Alpha is now preparing their cash budget for the third quarter of 2015. The following data is provided: $\begin{array}{|l|r|r|r|}\hline\text { Cash budget } &{\text { Jul }} &{\text { Aug }} & {\text { Sep }} \\\hline \text { Beginning cash balance } & \$ 4,000 & \$ 8,000 & \$ 6,958 \\\hline \text { Plus: Cash collections } & \underline{50,000} & \underline{40,000} & \underline{48,000} \\\hline \text { Cash available } & \$ 54,000 & \$ 48,000 & \$ 54,958 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchase of inventory } & 31,000 & 22,000 & 18,000 \\\hline \text { Operating expenses } & 12,000 & 9,000 & 11,600 \\\hline \text { Capital expenditures } & \underline{13,000} & \underline{25,000} & \underline{0} \\\hline \text { Less: Total cash payments } & \underline{56,000} & \$ 56,000 & \$ 29,600 \\\hline \text { Ending cash balance before financing } & -\$ 2,000 & -\$ 8,000 & \$ 25,358 \\\hline \text { Minimum cash balance desired } & \underline{-5,000} & \underline{-5,000} & -5,000 \\\hline \text { Cash excess/(deficiency) } & \underline{-\$ 7,000} & -\$ 13,000 & \$ 20,358 \\\hline \text { Financing } & & & \\\hline \text { Borrowing at end of month } & 10,000 & 15,000 & \\\hline \text { Principal repayments at end of month } & & & -\$ 20,000 \\\hline \text { Interest expense at } 5 \% & & -42 & -104 \\\hline \text { Total effects of financing } & 10,000 & 14,958 & -20,104 \\\hline \text { Ending cash balance } & \$ 8,000 & \$ 6,958 & \$ 5,254\\\hline\end{array}$ The amount of cash that should be shown in the budgeted balance sheet as on September 30^th would be:

A) $6,958.
B) $8,000.
C) $5,254.
D) $4,297.

Question 78

Farmerlands Enterprises has budgeted sales for the months of September and October at $300,000 and $280,000, respectively. Monthly sales are 80% credit and 20% cash. Of the credit sales, 50% are collected in the month of sale and 50% are collected in the following month. Calculate cash collections for the month of October.

A) $168,000
B) $232,000
C) $288,000
D) $290,000

Question 79

Nobula Corp. is preparing their budget for the 2^nd quarter and provides the following data: $\begin{array}{|l|c|c|c|} \hline& \text { Apr } &{\text { May }} & \text { Jun } \\\hline \text { Budgeted purchases } & \$ 20,000 & \$ 24,000 & \$ 18,000\\\hline \text { Budgeted Cash Payments for Inventory } & & & \\\text { Purchases } & \text { Apr } & \text { May } & \text { Jun } \\\hline 60 \% \text { of previous month purchases } & \$ 6,000 & \$ 12,000 & \$ 14,400 \\\hline 40 \% \text { of current month purchases } & 8,000 & 9,600 & 7,200 \\\hline \text { Total cash payments } & \$ 14,000 & \$ 21,600 & \$ 21,600 \\\hline\end{array}$ Assume that accounts payable pertains only to suppliers of inventory. Based on the above data, the amount of Accounts Payable that should be shown in the budgeted balance sheet as on June 30th is:

A) $12,000.
B) $3,600.
C) $10,800.
D) $5,400.

Question 80

A company has prepared the operating budget and the cash budget and is now preparing the budgeted balance sheet. While doing so, the cash balance can be taken from:

A) the operational budget.
B) the budgeted income statement.
C) the cash budget.
D) the sales budget.