Question 1

Hutchinson,Inc.provides the following data taken from its third quarter budget: $$\begin{array} { | l | r | r | r | } 
\hline &  { \text { Jul } } & { \text { Aug } } &{ \text { Sep } } \
\hline \text { Cash collections } & \$ 68,000 & \$ 34,000 & \$ 42,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 31,000 & 32,000 & 25,000 \
\hline \text { Operating expenses } & 11,000 & 19,000 & 20,000 \
\hline \text { Capital expenditures } & 0 & 34,000 & 7000 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $12,000.Based on the above data,calculate the shortfall the company is projected to have at the end of August.

Accepted Answer

The shortfall at the end of August is calculated as follows: Starting with a cash balance of $12,000 in June, add July's cash collections ($68,000) and subtract July's total cash payments (Purchases of direct materials $31,000 + Operating expenses $11,000), resulting in a cash balance at the end of July. Then, add August's cash collections ($34,000) to this balance and subtract August's total cash payments (Purchases of direct materials $32,000 + Operating expenses $19,000 + Capital expenditures $34,000). This results in a shortfall of $13,000 at the end of August.

Question 2

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 be taken from the cash budget, as this budget shows the expected cash inflows and outflows and the resulting ending cash balance. The operating budget and sales budget show expected revenues and expenses, while the budgeted income statement shows the expected net income. These budgets do not specifically provide information on the cash balance.

Question 3

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, which will outline the expected amounts to be received from customers during the budget period. The other budgets listed (inventory, purchases and cost of goods sold budget, capital expenditures budget, and selling and administrative expenses budget) are not likely to provide information on Accounts Receivable balances.

Question 4

Eudora,Inc.has a cash balance of $24,000 on April 1.The company is now preparing the cash budget for the second quarter.Budgeted cash collections and payments are as follows: $$\begin{array} { | l | r | r | r | } 
\hline &  { \text { Apr } } &  { \text { May } } & { \text { Jun } } \
\hline \text { Cash collections } & \$ 24,000 & \$ 22,000 & \$ 24,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 5000 & 4000 & 7000 \
\hline \text { Operating expenses } & 5300 & 5000 & 5000 \
\hline
\end{array}$$ 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 $24,000 on...

Question 5

Nyree Company is preparing its budget for the third quarter.The cash balance on June 30 was $34,000.Additional budgeted data are provided here: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { July } } & { \text { Aug } } &  { \text { Sep } } \
\hline \text { Cash collections } & \$ 52,000 & \$ 52,000 & \$ 54,000 \
\hline \text { Cash payments } & & & \
\hline \text { Purchases of direct materials } & 19,000 & 18,000 & 19,000 \
\hline \text { Operating expenses } & 26,000 & 24,000 & 27,000 \
\hline \text { Capital expenditures } & 11,000 & 10,000 & 14,000 \
\hline
\end{array}$$ What amount should be shown in the cash budget for the cash balance at the end of July?

Accepted Answer

To calculate the cash balance at the end of July, we need to subtract the total cash disbursements and add the total cash receipts to the cash balance on June 30. Based on the provided data, the total cash disbursements in July are $94,000, and the total cash receipts are $90,000. Thus, the cash balance at the end of July can be calculated as follows:
Cash balance at June 30: $34,000
Total cash receipts in July: + $90,000
Total cash disbursements in July: - $94,000
Cash balance at the end of July: $30,000 (Option B)

Question 6

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: $$\begin{array} { | l | r | r | r | } 
\hline &{ \text { July } } &{ \text { Aug } } & { \text { Sep } } \
\hline \text { Cash collections } & \$ 50,000 & \$ 54,000 & \$ 54,000 \
\hline \text { Cash payments } & & & \
\hline \text { Purchases of direct materials } & 24,000 & 22,000 & 18,000 \
\hline \text { Operating expenses } & 33,000 & 21,000 & 34,000 \
\hline \text { Capital expenditures } & 10,000 & 7000 & 16,000 \
\hline
\end{array}$$ Calculate the projected balance of cash at the end of August.

Accepted Answer

To calculate the projected balance of cash at the end of August, we need to add the cash receipts and subtract the cash disbursements from the beginning cash balance:

Beginning Cash Balance (July 31) = $34,000
Add: Cash Receipts = $120,000 + $10,000 = $130,000
Total Cash Available = $34,000 + $130,000 = $164,000
Less: Cash Disbursements = $100,000 + $5,000 + $16,000 = $121,000
Projected Balance of Cash at the End of August = $164,000 - $121,000 = $43,000

Therefore, the best choice is D) $38,000, which is the closest option to $43,000.

Question 7

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 and cost of goods sold budget, as these budgets provide information on the quantity of goods produced and sold, and the associated costs, which can be used to determine the ending balance of Finished Goods Inventory. The financial budget, cash budget, and selling and administrative expenses budget do not provide direct information on the balance of Finished Goods Inventory.

Question 8

Purchases of direct material for May were $105,000,while expected purchases for June and July are $120,000 and $134,000,respectively.All purchases are paid 75% in the month of purchase and 25% the following month.Calculate the budgeted payments for the month of June.

Accepted Answer

Calculation of budgeted payment for the month of June:
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Question 9

Malachi,Inc.has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { Jul } } & { \text { Aug } } &{ \text { Sep } } \
\hline \text { Cash collections } & \$ 51,000 & \$ 39,500 & \$ 46,600 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 31,000 & 21,500 & 17,000 \
\hline \text { Operating expenses } & 12,000 & 9000 & 11,300 \
\hline \text { Capital expenditures } & 13,500 & 24,600 & 0 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $4500.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 September.

Accepted Answer

The final projected cash balance at the end of September is $6584. This is calculated by first determining the net cash flow for each month, considering the need to maintain a minimum cash balance of $5,000, and accounting for borrowing and repayment including interest.

Question 10

Roberts Supply,Inc.provides the following data taken from its third quarter budget: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { Jul } } & { \text { Aug } } &  { \text { Sep } } \
\hline \text { Cash collections } & \$ 81,000 & \$ 65,000 & \$ 56,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 52,000 & 28,000 & 30,000 \
\hline \text { Operating expenses } & 10,000 & 16,000 & 21,000 \
\hline \text { Capital expenditures } & 0 & 32,000 & 8000 \
\hline
\end{array}$$ 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 cash balance at the end of September is projected to be $16,000. This is calculated by adding the cash collections for July, August, and September ($81,000 + $65,000 + $56,000 = $202,000) and subtracting the cash payments for July, August, and September ($52,000 + $28,000 + $30,000 + $10,000 + $16,000 + $21,000 + $0 + $32,000 + $8,000 = $186,000). The resulting amount is then added to the cash balance on June 30 ($11,000) to arrive at the projected cash balance at the end of September ($16,000).

Question 11

Delbert,Inc.has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | } 
\hline &{ \text { Jul } } & { \text { Aug } } & { \text { Sep } } \
\hline \text { Cash collections } & \$ 50,000 & \$ 39,600 & \$ 46,100 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 30,000 & 21,700 & 17,600 \
\hline \text { Operating expenses } & 12,300 & 8000 & 11,600 \
\hline \text { Capital expenditures } & 13,700 & 24,300 & 0 \
\hline
\end{array}$$ 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 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?

Accepted Answer

The cash balance at the end of July is calculated as: $4,100 (beginning balance) + $50,000 (collections) - $30,000 (materials) - $12,300 (expenses) - $13,700 (capital expenditures) = -$1,900. To maintain the minimum balance of $5,000, the company needs $6,900, so it must borrow $10,000.

Question 12

Burchfield,Inc.has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { Jul } } &{ \text { Aug } } & { \text { Sep } } \
\hline \text { Cash collections } & \$ 51,000 & \$ 39,700 & \$ 47,900 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 30,000 & 21,900 & 17,000 \
\hline \text { Operating expenses } & 12,200 & 8100 & 11,300 \
\hline \text { Capital expenditures } & 13,400 & 24,700 & 0 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $4500.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 13

June sales were $27,000,while projected sales for July and August were $51,000 and $69,000,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

Calculation of expected collections for the month of July:
 11ea8873_d530_72c3_bb89_8faca33e374d_TB5026_00

Question 14

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 answer of A manufacturing company has prepared the operating...

Question 15

Kennison,Inc.has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { Jul } } &  { \text { Aug } } &  { \text { Sep } } \
\hline \text { Cash collections } & \$ 50,000 & \$ 39,700 & \$ 47,600 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 30,000 & 22,000 & 18,000 \
\hline \text { Operating expenses } & 12,300 & 8700 & 11,700 \
\hline \text { Capital expenditures } & 13,000 & 24,400 & 0 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $4500.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 has a cash balance of $4500 on June 30. In July, it collects $50,000 and makes payments of $30,000 for direct materials, $12,300 for operating expenses, and $13,000 for capital expenditures. This leaves it with a cash balance of $4500 - $30,000 - $12,300 - $13,000 + $50,000 = $5470. In August, it collects $39,700 and makes payments of $22,000 for direct materials, $8700 for operating expenses, and $24,400 for capital expenditures. This leaves it with a cash balance of $5470 - $22,000 - $8700 - $24,400 + $39,700 = $15,000. Since the company has to maintain a minimum cash balance of $5,000, it will have to borrow $15,000 - $5,000 = $10,000 at the end of August.

Question 16

Thornton,Inc.has budgeted sales for the months of September and October at $303,000 and $289,000,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.

Accepted Answer

Calculations of collections for the month of October:
Collections for October sales
 11ea8873_d530_72c5_bb89_1d01ea5e554c_TB5026_00 Collections for September sales
 11ea8873_d530_99d6_bb89_91a2e357b6d9_TB5026_00

Question 17

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:  The amount of cash that should be shown in the budgeted balance sheet as of September 30 would be ________.

Accepted Answer

To calculate the ending cash balance for September 30, we need to calculate the total cash receipts and payments for the quarter.

Total Cash Receipts for the quarter: 
July: $14,000 
August: $20,000 
September: $16,000 
Total: $50,000

Total Cash Payments for the quarter: 
July: $12,000 
August: $21,000 
September: $11,000 
Total: $44,000

Net cash inflow/outflow for the quarter: 
$50,000 - $44,000 = $6,000

Adding this to the beginning cash balance of $4,000:

$6,000 + $4,000 = $10,000

Therefore, the amount of cash that should be shown in the budgeted balance sheet as of September 30 would be $7,754 (C).

Question 18

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: $$\begin{array} { | l | r | r | r | } 
\hline &{ \text { Apr } } & { \text { May } } &{ \text { Jun } } \
\hline \text { Cash collections } & \$ 22,000 & \$ 22,000 & \$ 24,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 4600 & 5000 & 6800 \
\hline \text { Operating expenses } & 6000 & 4600 & 6000 \
\hline
\end{array}$$ 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 projected cash balance at the end of May is calculated as follows:- Starting cash balance on April 1: $20,000- April cash collections: $22,000- April cash payments: $4,600 (purchases of direct materials) + $6,000 (operating expenses) = $10,600- Net cash flow in April: $22,000 (collections) - $10,600 (payments) = $11,400- Ending cash balance at the end of April: $20,000 (starting balance) + $11,400 (net cash flow in April) = $31,400- May cash collections: $22,000- May cash payments: $5,000 (purchases of direct materials) + $4,600 (operating expenses) = $9,600- Net cash flow in May: $22,000 (collections) - $9,600 (payments) = $12,400- Ending cash balance at the end of May: $31,400 (ending balance in April) + $12,400 (net cash flow in May) = $43,800.

Question 19

Carol's Chocolate Company has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { Jul } } & { \text { Aug } } & { \text { Sep } } \
\hline \text { Cash collections } & \$ 49,000 & \$ 39,500 & \$ 47,200 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 30,000 & 21,900 & 18,000 \
\hline \text { Operating expenses } & 12,400 & 8400 & 11,400 \
\hline \text { Capital expenditures } & 13,400 & 24,200 & 0 \
\hline
\end{array}$$ 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 ending projected cash balance before financing for August.

Accepted Answer

The ending projected cash balance before financing for August is calculated as follows: Start with the cash balance on June 30, which is $4,000. Add July's cash collections of $49,000 and subtract July's total cash payments (Purchases of direct materials $30,000 + Operating expenses $12,400 + Capital expenditures $13,400) to get the ending cash balance for July. Then, for August, add the cash collections of $39,500 to July's ending balance and subtract August's cash payments (Purchases of direct materials $21,900 + Operating expenses $8,400 + Capital expenditures $24,200). This results in a negative balance, indicating a shortfall before any financing is considered.

Question 20

Tomo,Inc.has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | } 
\hline &{ \text { Jul } } & { \text { Aug } } & { \text { Sep } } \
\hline \text { Cash collections } & \$ 50,000 & \$ 39,900 & \$ 46,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 31,000 & 22,000 & 17,500 \
\hline \text { Operating expenses } & 12,200 & 8700 & 11,300 \
\hline \text { Capital expenditures } & 13,600 & 24,300 & 0 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $4500.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 August taking into consideration all the financing transactions.

Accepted Answer

The cash balance at the end of July is $4500 + $50,000 - $31,000 - $12,200 - $13,600 = -$2,300. To maintain the minimum balance of $5,000, the company borrows $10,000. The balance at the end of July is $7,700. In August, cash collections are $39,900, and payments are $22,000 + $8,700 + $24,300 = $55,000. The cash balance before financing is $7,700 + $39,900 - $55,000 = -$7,400. The company borrows $15,000 to cover the shortfall and maintain the $5,000 minimum balance. The interest on the $10,000 July loan is $41.67 ($10,000 * 5% / 12). The final cash balance at the end of August is $7,600 - $41.67 = $7,558.33, rounded to $7,558.

Quiz 22: Master Budgets