Question 1

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Inventory, which document should be used?

Accepted Answer

The Inventory, purchases and cost of goods sold budget would provide the necessary information to determine the balance of Inventory on the budgeted balance sheet. This budget would show the estimated purchases of inventory, the cost of goods sold, and ultimately the ending balance of inventory which can be used in the balance sheet. The other options do not provide any information about inventory balance.

Question 2

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Accounts receivable, which document should be used?

Accepted Answer

The budgeted balance sheet requires information from the cash budget and the sales budget. To calculate accounts receivable balance, the sales budget should be added to the budgeted cash collections since not all sales will be collected in cash immediately. Therefore, Option B (sales budget plus budgeted cash collections) is the correct answer. Option A (inventory, purchases and cost of goods sold budget) is related to calculating the inventory balance, Option C (cash budget) is related to determining the ending cash balance, and Option D (operating expenses budget) is not relevant to determining the accounts receivable balance.

Question 3

AAA Company is preparing its 3rd quarter budget and provides the following data:  Cash balance at June 30 is projected to be $4,000. The company is required 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 pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash.
How much will the company have to borrow at the end of August?

Accepted Answer

The answer of AAA Company is preparing its 3rd quarter...

Question 4

AAA Company is preparing its 3rd quarter budget and provides the following data:  Cash balance at June 30 is projected to be $4,000. The company is required 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 pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash.
What will the final cash balance be at the end of August, after all required financing transactions have been taken into consideration?

Accepted Answer

The answer of AAA Company is preparing its 3rd quarter...

Question 5

AAA Company is preparing its 3rd quarter budget and provides the following data:  Cash balance at June 30 is projected to be $4,000. The company is required 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 pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash.
How much will the company have to borrow at the end of July?

Accepted Answer

The answer of AAA Company is preparing its 3rd quarter...

Question 6

Charter Company is preparing their budget for the 1^st quarter of 2012. The following data is provided: For the budgeted balance sheet at March 31, what amount should be shown for Inventory?

Accepted Answer

To calculate the amount of inventory for the budgeted balance sheet, we need to use the formula: Beginning Inventory + Purchases - Cost of Goods Sold = Ending Inventory. 
From the provided data, we know that: 
- Beginning Inventory for January is $7,000 
- Purchases for the first quarter (Jan-Feb-Mar) are $28,500 
- Cost of Goods Sold for the first quarter (Jan-Feb-Mar) is $25,700 
Using the formula: 
Beginning Inventory + Purchases - Cost of Goods Sold = Ending Inventory 
$7,000 + $28,500 - $25,700 = $9,800 
Therefore, the amount that should be shown for Inventory in the budgeted balance sheet at March 31 is $9,800, which is option D.

Question 7

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. What are the expected collections for July?

Accepted Answer

June sales were $40,000, and July and August were projected to be $50,000 and $60,000, respectively.

40% of sales are cash, and 60% are credit. Therefore, expected cash sales in July are:

Cash sales = Total sales x % cash sales
Cash sales = $50,000 x 0.4
Cash sales = $20,000

For credit sales, all are collected in the following month. Therefore, we need to consider June's credit sales for July's collections.

Credit sales in June = Total sales x % credit sales
Credit sales in June = $40,000 x 0.6
Credit sales in June = $24,000

Thus, the expected collections for July are:

Expected collections = Cash sales + Credit collected from June
Expected collections = $20,000 + $24,000
Expected collections = $44,000

Therefore, the best choice is B.

Question 8

Caribbean Tool and Die Company's forecasted sales for April, May, June and July are $150,000, $225,000, $180,000, and $210,000, respectively. Sales are 50% cash and 50% credit with all accounts receivables collected in the month following the sale. What are the cash collections budgeted for June?

Accepted Answer

The cash collections for each month can be calculated as follows:

- April cash collections: 50% of $150,000 = $75,000 
- May cash collections: 50% of $225,000 = $112,500 
- June cash collections: 50% of $180,000 (sales) + 50% of $75,000 (credit sales from April) = $90,000 + $37,500 = $127,500 
- July cash collections: 50% of $210,000 (sales) + 50% of $112,500 (credit sales from May) = $105,000 + $56,250 = $161,250

Therefore, the cash collections budgeted for June are $127,500, which corresponds to choice C.

Question 9

Beta Company is now preparing their budget for the 2^nd quarter. The following data is provided: For the budgeted balance sheet at June 30, what amount should be shown for Accounts receivable?

Accepted Answer

The answer of Beta Company is now preparing their budget...

Question 10

Hatfield Company has the following budgeted credit sales for the last four months of the year-September, $13,000; October, $19,000; November $20,000; December, $24,000. Experience has shown that payment for the credit sales is received as follows: 10% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 10% uncollectible. How much cash can Hatfield Company expect to collect in November as a result of credit sales?

Accepted Answer

D) Calculations: $2,000 + ($19,000 × 60%) + ($13,000 × 20%) = $16,000

Question 11

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Retained earnings, which document should be used?

Accepted Answer

The budgeted income statement will provide the net income figure needed to determine the balance for Retained Earnings on the budgeted balance sheet.

Question 12

AAA Company is preparing its 3rd quarter budget and provides the following data:  Cash balance at June 30 is projected to be $4,000. The company is required 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 pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash.
What is the budgeted cash balance at the end of July, after required financing transactions?

Accepted Answer

The answer of AAA Company is preparing its 3rd quarter...

Question 13

AAA Company is preparing its 3rd quarter budget and provides the following data:  Cash balance at June 30 is projected to be $4,000. The company is required 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 pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash.
What amount of principal should the company repay to the bank at the end of September?

Accepted Answer

The answer of AAA Company is preparing its 3rd quarter...

Question 14

At June 30, 2012, Alpha Company's cash balance is $4,000. Alpha is now preparing their cash budget for the third quarter of 2012. The following data is provided:  For the budgeted balance sheet at September 30, 2012, what amount of Cash should be shown?

Accepted Answer

The answer of At June 30, 2012, Alpha Company's cash...

Question 15

Advance Engineering makes payments on its inventory purchases as follows-30% in the month of purchase, 50% in the following month, and 20% in the second month following purchase. Budgeted inventory purchases for June, July, and August are $50,000, $43,000 and $56,000, respectively. At what amount are cash payments for inventory in August budgeted?

Accepted Answer

B) Calculations:
$56,000 × 30% = $16,800
$43,000 × 50% = $21,500
$50,000 × 20% = $10,000
$16,800 + $21,500 + $10,000 = $48,300

Question 16

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. At what amount are June payments for purchases budgeted?

Accepted Answer

A) Calculations:
$110,000 × 25% = $27,500
$100,000 × 75% = $75,000
$27,500 + $75,000 = $102,500

Question 17

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Accounts payable, which document should be used?

Accepted Answer

Accounts payable represent amounts owed to suppliers for purchases made on credit. Therefore, the best document to provide the balance for accounts payable is the budgeted cash payments for purchases, as it shows how much the company plans to pay its suppliers during the budget period.

Question 18

AAA Company is preparing its 3rd quarter budget and provides the following data:  Cash balance at June 30 is projected to be $4,000. The company is required 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 pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash.
What is the final projected cash balance at the end of September?

Accepted Answer

- Starting cash balance at June 30: $4,000
- Minimum required cash balance: $5,000
- Therefore, the company needs to borrow $1,000 at the end of June.
- Interest on $1,000 loan for July: (5% / 12) x $1,000 = $4.17
- Total cash available for July: $4,000 + $5,000 (borrowing) - $4.17 (interest) = $9,995.83
- Total cash available for August: $9,995.83 + $5,000 (borrowing) - $4.17 (interest) = $15,991.66
- Total cash available for September: $15,991.66 - $5,000 (repayment) - $4.17 (interest) = $10,987.49
- Final projected cash balance at the end of September: $10,987.49.

The best choice is B because it correctly calculates the borrowing and repayment amounts for each month and accounts for the interest payments.

Question 19

AAA Company is preparing its 3rd quarter budget and provides the following data:  Cash balance at June 30 is projected to be $4,000. The company is required 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 pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash.
What is the projected cash shortfall at the end of August, before financing transactions have been taken into consideration?

Accepted Answer

The answer of AAA Company is preparing its 3rd quarter...

Question 20

Farmington 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. What are the October cash collections from customers?

Accepted Answer

C) Calculations:
$280,000 × 20% = $56,000
($280,000 × 80%) × 50% = $112,000
($300,000 × 80%) × 50% = $120,000
$56,000 + $112,000
+ $120,000 = $288,000

Quiz 22: The Master Budget and Responsibility Accounting

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Inventory, which document should be used?

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Accounts receivable, which document should be used?

Charter Company is preparing their budget for the 1st quarter of 2012. The following data is provided: For the budgeted balance sheet at March 31, what amount should be shown for Inventory?

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. What are the expected collections for July?

Caribbean Tool and Die Company's forecasted sales for April, May, June and July are $150,000, $225,000, $180,000, and $210,000, respectively. Sales are 50% cash and 50% credit with all accounts receivables collected in the month following the sale. What are the cash collections budgeted for June?

Beta Company is now preparing their budget for the 2nd quarter. The following data is provided: For the budgeted balance sheet at June 30, what amount should be shown for Accounts receivable?

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Retained earnings, which document should be used?

At June 30, 2012, Alpha Company's cash balance is $4,000. Alpha is now preparing their cash budget for the third quarter of 2012. The following data is provided: For the budgeted balance sheet at September 30, 2012, what amount of Cash should be shown?

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. At what amount are June payments for purchases budgeted?

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Accounts payable, which document should be used?

Charter Company is preparing their budget for the 1^st quarter of 2012. The following data is provided: For the budgeted balance sheet at March 31, what amount should be shown for Inventory?

Beta Company is now preparing their budget for the 2^nd quarter. The following data is provided: For the budgeted balance sheet at June 30, what amount should be shown for Accounts receivable?