Question 1

June sales were $30,000,while projected sales for July and August were $52,000 and $74,000,respectively.Sales are 60% cash and 40% credit.All credit sales are collected in the month following the sale.Calculate expected collections for July.

Accepted Answer

The answer of June sales were $30,000,while projected sales for...

Question 2

Thornton,Inc.has budgeted sales for the months of September and October at $300,000 and $270,000,respectively.Monthly sales are 20% credit and 80% 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.

Accepted Answer

Step 1: Calculate credit sales for September and October
Credit sales for September = $300,000 x 20% = $60,000
Credit sales for October = $270,000 x 20% = $54,000

Step 2: Calculate cash sales for September and October
Cash sales for September = $300,000 x 80% = $240,000
Cash sales for October = $270,000 x 80% = $216,000

Step 3: Calculate cash collections for September
Cash collections for September = Cash sales for September + 50% of credit sales for August
Cash collections for September = $240,000 + ($60,000 x 50%) = $270,000

Step 4: Calculate cash collections for October
Cash collections for October = Cash sales for October + 50% of credit sales for September + 50% of credit sales for October
Cash collections for October = $216,000 + ($60,000 x 50%) + ($54,000 x 50%) = $273,000

Therefore, the best choice is C, $273,000.

Question 3

A manufacturing 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 the ________.

Accepted Answer

The cash balance can only be taken from the cash budget, as it is the only budget that includes predicted cash inflows and outflows. The operational budget and sales budget deal with predicted revenue and expenses, while the budgeted income statement shows the company's financial performance over a period of time, but doesn't provide a cash balance figure.

Question 4

Delbert,Inc.has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { Jul } } & { \text { Aug } } &{ \text { Sep } } \
\hline \text { Cash collections } & \$ 50,000 & \$ 39,700 & \$ 47,300 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 30,000 & 21,500 & 17,800 \
\hline \text { Operating expenses } & 12,400 & 8800 & 11,500 \
\hline \text { Capital expenditures } & 13,400 & 24,500 & 0 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $4600.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 4%.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?

Accepted Answer

At the end of July, the cash balance is $4600 + $50,000 (collections) - $30,000 (materials) - $12,400 (expenses) - $13,400 (capital) = $4600. Since the company needs a minimum of $5000, it must borrow $10,000 to cover the shortfall and maintain the minimum balance.

Question 5

Purchases of direct material for May were $115,000,while expected purchases for June and July are $121,000 and $136,000,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.

Accepted Answer

In June, 25% of June's purchases ($121,000) are paid, which is $30,250. Additionally, 75% of May's purchases ($115,000) are paid, which is $86,250. The total payment for June is $30,250 + $86,250 = $116,500.

Question 6

Hutchinson,Inc.provides the following data taken from its third quarter budget: $$\begin{array} { | l | r | r | r | } 
\hline & \textbf { Jul } & \textbf{ Aug } &{ \textbf { Sep } } \
\hline \text { Cash collections } & \$ 66,000 & \$ 38,000 & \$ 45,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 37,000 & 31,000 & 50,000 \
\hline \text { Operating expenses } & 10,000 & 19,000 & 20,000 \
\hline \text { Capital expenditures } & 0 & 35,000 & 6000 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $15,000.Based on the above data,calculate the shortfall the company is projected to have at the end of August.

Accepted Answer

The answer of Hutchinson,Inc.provides the following data taken from its...

Question 7

Berman Company is preparing its budget for the third quarter.Cash balance on July 31 was $34,000.Assume there is no minimum balance of cash required and no borrowing is undertaken.Additional budgeted data are provided here: $$\begin{array} { | l | r | r | r | } 
\hline &  { \textbf { July } } &  { \textbf { Aug } } &{ \textbf { Sep } } \
\hline \text { Cash collections } & \$ 53,000 & \$ 53,000 & \$ 54,000 \
\hline \text { Cash payments } & & & \
\hline \text { Purchases of direct materials } & 25,000 & 26,000 & 21,000 \
\hline \text { Operating expenses } & 34,000 & 26,000 & 30,000 \
\hline \text { Capital expenditures } & 12,000 & 13,000 & 11,000 \
\hline
\end{array}$$ Calculate the projected balance of cash at the end of August.

Accepted Answer

The answer of Berman Company is preparing its budget for...

Question 8

Eudora,Inc.has a cash balance of $22,000 on April 1.The company is now preparing the cash budget for the second quarter.Budgeted cash collections and payments are as follows: $\begin{array}{|l|r|r|r|} 
\hline&{\text { Apr }} &{\text { May }} &{\text { Jun }} \
\hline \text { Cash collections } & \$ 24,000 & \$ 25,000 & \$ 20,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 6000 & 5000 & 5000 \
\hline \text { Operating expenses } & 3500 & 6000 & 4600 \
\hline
\end{array}$ 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.

Accepted Answer

The answer of Eudora,Inc.has a cash balance of $22,000 on...

Question 9

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

Accepted Answer

The balance of Finished Goods Inventory can be taken from the production budget, which shows the amount of finished goods to be produced in a given period, and the cost of goods sold budget, which shows the cost of goods sold during that same period. By subtracting the cost of goods sold from the total production, the balance of Finished Goods Inventory can be calculated. The financial budget, cash budget, and selling and administrative expenses budget do not provide information about the balance of Finished Goods Inventory.

Question 10

Nyree Company is preparing its budget for the third quarter.The cash balance on June 30 was $32,000.Additional budgeted data are provided here: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { July } } &  { \text { Aug } } & { \text { Sep } } \
\hline \text { Cash collections } & \$ 53,000 & \$ 51,000 & \$ 56,000 \
\hline \text { Cash payments } & & & \
\hline \text { Purchases of direct materials } & 20,000 & 20,000 & 20,000 \
\hline \text { Operating expenses } & 32,000 & 20,000 & 23,000 \
\hline \text { Capital expenditures } & 16,000 & 7000 & 9000 \
\hline
\end{array}$$ What amount should be shown in the cash budget for the cash balance at the end of July?

Accepted Answer

The cash balance at the end of July is calculated as the beginning balance plus cash collections minus cash payments. Starting with $32,000, add $53,000 in collections, and subtract $20,000 (materials), $32,000 (expenses), and $16,000 (capital expenditures), resulting in $17,000.

Question 11

Carol's Chocolate Company has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { Jul } } & { \text { Aug } } &{ \text { Sep } } \
\hline \text { Cash collections } & \$ 49,000 & \$ 40,000 & \$ 46,500 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 29,000 & 21,200 & 17,500 \
\hline \text { Operating expenses } & 12,400 & 8100 & 11,000 \
\hline \text { Capital expenditures } & 13,100 & 24,800 & 0 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $4300.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 4%.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 projected cash balance before financing for August.

Accepted Answer

The answer of Carol's Chocolate Company has prepared its third...

Question 12

Roberts Supply,Inc.provides the following data taken from its third quarter budget: $$\begin{array} { | l | r | r | r | } 
\hline & { \textbf { Jul } } & { \textbf { Aug } } & { \textbf { Sep } } \
\hline \text { Cash collections } & \$ 82,000 & \$ 65,000 & \$ 60,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 48,000 & 29,000 & 50,000 \
\hline \text { Operating expenses } & 9000 & 16,000 & 20,000 \
\hline \text { Capital expenditures } & 0 & 32,000 & 6000 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $11,000.Based on the above data,calculate the cash balance the company is projected to have at the end of September.

Accepted Answer

The answer of Roberts Supply,Inc.provides the following data taken from...

Question 13

On June 30,Kahlil Company's cash balance is $4,000.Kahlil is now preparing their cash budget for the third quarter of the year.The following data is provided: \(\begin{array}{|l|c|c|c|}
\hline \textbf{Cash budget} & \textbf{July} & \textbf{Aug} & \textbf{Sep} \
\hline \text{Beginning cash balance} & \$ 4,000  &  \$ 8,000  &  \$ 6958  \
\hline \text{Plus: Cash collections} & \underline{50,000} & \underline{40,000} & \underline{48,100}_{} \
\hline \text{Cash available} &  \underline{\$ 54,000}  &  \underline{\$ 48,000} \quad  &  \underline{\$ 55,058}  \
\hline \text{ Less: Cash payments } \
\hline \text{Purchases of direct materials} & 31,000 & 22,000 & 16,600\
\hline \text{Operating expenses} & 12,000 & 9,000 & 10,900\
\hline \text{Capital expenditures} & 13,000 & 25,000 & 0\
\hline \text{Interest expense at  5 \%}  & \underline{0} & \underline{42} & \underline{104}\
\hline \text{Less: Total cash payments} &  \underline{\$ 56,000}  &  \underline{\$ 56,042} \quad  &  \underline{\$ 27,604 }\
\hline \text{Ending cash balance before financing} &  \$(2,000)  &  \$(8,042)  &  \$ 27,454  \
\hline \text{Minimum cash balance desired} &  \underline{(5,000)}_{}  &  \underline{(5,000)}  & \underline{(5,000)} \
\hline \text{Cash excess/(deficiency)}& \underline{\$(7,000)}_{}& \underline{\$(13,042)}& \underline{\$22,454}\
\hline \text{Financing}\
\hline \text { Borrowing at end of month } & 10,000 & 15,000 & \
\hline \text { Principal repayments at end of month } & \underline{~~~~~~~~~~~~}& \underline{~~~~~~~~~~~~}& \underline{\$(20,000)}_{} \
\hline \text { Total effects of financing } & 10,000 & 15,000 & (20,000) \
\hline \text { Ending cash balance } & \underline{\$ 8,000}_{} & \underline{\$ 6,958} & \underline{\$ 7454} \
\hline
\end{array}\) The amount of cash that should be shown in the budgeted balance sheet as of September 30 would be ________.

Accepted Answer

To calculate the cash balance as of September 30, we need to add the cash receipts and subtract the cash payments for the third quarter.

Cash receipts:
- July: $15,000
- August: $17,500
- September: $20,000
Total cash receipts: $52,500

Cash payments:
- July: $16,000
- August: $18,000
- September: $13,000
Total cash payments: $47,000

Net cash inflow for the third quarter: $5,500

Adding this to the beginning cash balance of $4,000, we get a budgeted cash balance of $9,500 as of September 30. However, we also need to consider the $2,046 cash balance that should be shown in the budgeted balance sheet as of June 30.

Therefore, the amount of cash that should be shown in the budgeted balance sheet as of September 30 is $9,500 + $2,046 = $7,454 (Option C).

Question 14

Tomo,Inc.has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { Jul } } & { \text { Aug } } &{ \text { Sep } } \
\hline \text { Cash collections } & \$ 52,000 & \$ 39,600 & \$ 47,200 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 31,000 & 21,200 & 17,800 \
\hline \text { Operating expenses } & 12,500 & 8900 & 11,400 \
\hline \text { Capital expenditures } & 13,100 & 24,900 & 0 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $4300.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 4%.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 August taking into consideration all the financing transactions.

Accepted Answer

At the end of July, the cash balance is $4,300 + $52,000 - $31,000 - $12,500 - $13,100 = -$300. Since the company needs a minimum of $5,000, it borrows $5,000, resulting in a cash balance of $4,700. At the end of August, the cash balance is $4,700 + $39,600 - $21,200 - $8,900 - $24,900 = -$10,700. The company borrows $15,000 to cover the shortfall and maintain the $5,000 minimum balance. The interest for July's $5,000 loan is $5,000 * (4%/12) = $16.67. The final cash balance at the end of August is $4,300 + $39,600 - $21,200 - $8,900 - $24,900 + $15,000 - $16.67 = $9,267.

Question 15

Malachi,Inc.has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | } 
\hline &{ \text { Jul } } &{ \text { Aug } } & { \text { Sep } } \
\hline \text { Cash collections } & \$ 49,000 & \$ 39,900 & \$ 47,200 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 30,000 & 21,500 & 17,600 \
\hline \text { Operating expenses } & 12,500 & 8900 & 11,400 \
\hline \text { Capital expenditures } & 13,100 & 24,500 & 0 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $4600.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.

Accepted Answer

The projected cash balance at the end of September is $6054 after accounting for cash collections, payments, borrowing, and interest payments.

Question 16

Kennison,Inc.has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | } 
\hline &{ \text { Jul } } & { \text { Aug } } & { \text { Sep } } \
\hline \text { Cash collections } & \$ 49,000 & \$ 40,000 & \$ 47,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 28,000 & 21,900 & 18,100 \
\hline \text { Operating expenses } & 12,500 & 9100 & 11,500 \
\hline \text { Capital expenditures } & 13,700 & 24,500 & 0 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $4100.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 4%.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?

Accepted Answer

The company will have to borrow $15,000 at the end of August to maintain a minimum cash balance of $5,000.

Question 17

Burchfield,Inc.has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | } 
\hline &  { \text { Jul } } & { \text { Aug } } & { \text { Sep } } \
\hline \text { Cash collections } & \$ 49,000 & \$ 39,900 & \$ 47,700 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 30,000 & 21,300 & 17,400 \
\hline \text { Operating expenses } & 12,100 & 8800 & 11,100 \
\hline \text { Capital expenditures } & 13,100 & 24,700 & 0 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $4000.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 4%.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.

Accepted Answer

The answer of Burchfield,Inc.has prepared its third quarter budget and...

Question 18

A manufacturing 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 the ________.

Accepted Answer

The balance of Accounts Receivable can be obtained from the schedule of cash receipts from customers. This schedule shows the expected inflow of cash from customers, which will include payments for sales made on credit, thereby determining the accounts receivable balance. The other budgets listed do not directly provide information on the accounts receivable balance.

Question 19

Verle,Inc.has a cash balance of $20,000 on April 1.The company is now preparing the cash budget for the second quarter.Budgeted cash collections and payments are as follows: $$\begin{array} { | l | r | r | r | } 
\hline & \text { Apr } & \text { May } & \text { Jun } \
\hline \text { Cash collections } & \$ 25,000 & \$ 24,000 & \$ 25,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 5800 & 5800 & 7000 \
\hline \text { Operating expenses } & 3500 & 5000 & 5300 \
\hline
\end{array}$$ 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.

Accepted Answer

The cash balance at the end of May is calculated as follows: Starting balance on April 1 is $20,000. Add cash collections for April and May ($25,000 + $24,000) and subtract cash payments for April and May ($5,800 + $3,500 + $5,800 + $5,000). The projected cash balance at the end of May is $48,900.

Question 20

A manufacturing 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 the ________.

Accepted Answer

The balance of Accounts Payable can be determined by combining information from the production budget, which outlines the amount of materials to be purchased, and the cost of goods sold budget, which calculates the cost of the goods produced. These two budgets will determine the total amount owed to suppliers for materials used in production. Therefore, the correct choice is A.

Quiz 22: Master Budgets