Question 1

Nobell Ltd has a cash balance of $22,000 on 1 April 2017.It is now preparing the cash budget for the second quarter.Budgeted cash collections and payments are as follows:
$\begin{array}{|l|l|l|l|} 
\hline& \text { Apr } & \text { May } & \text { Jun } \
\hline \text { Cash collections } & \$ 20,000 & \$ 22,000 & \$ 25,000 \
\hline \text { Cash payments } & & &\
\hline \text { Purchases of inventory } & 5300 & 5800 & 4000 \
\hline \text { Operating expenses } & 6000 & 3500 & 6000\
\hline
\end{array}$

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 April.

Accepted Answer

The projected cash balance at the end of April is $30,700. This is calculated by adding the beginning cash balance of $22,000 to the budgeted cash collections for April of $20,000 and then subtracting the budgeted cash payments for April of $11,300.

Question 2

When a company is preparing a budgeted cash flow statement and it wishes to calculate the collections from customers,it should refer to which of the following?

Accepted Answer

The answer of When a company is preparing a budgeted...

Question 3

Gamma Company has prepared a preliminary cash budget for the third quarter as shown below:
$$\begin{array} { | l | l | l | l | } 
\hline \text { Cash budget } & { \text { Jul } } & { \text { Aug } } & { \text { Sep } } \
\hline \text { Beginning cash balance } & \$ 34,000 & \$ 14,000 & \$ 16,500 \
\hline \text { Plus: cash collections } & \$ 56,000 & \$ 51,000 & 45,400 \
\hline \text { Cash available } & \$ 0,000 & \$ 65,000 & \$ 61,900 \
\hline \text { Less: cash payments: } & & & \
\hline \text { Purchases of inventory } & 36,000 & 9000 & 10,000 \
\hline \text { Operating expenses } & \$ 9,000 & 30,500 & 30,900 \
\hline \text { Capital expenditures } & 1000 & 9000 & 7400 \
\hline \text { Ending cash balance } & \$ 14,000 & \$ 16,500 & \$ 13,600 \
\hline
\end{array}$$
Subsequently,the marketing department revised its figures for cash collections.New data are as follows: $53,000 in July,$50,000 in August and $42,000 in September.Based on the new data,calculate the new projected cash balance at the end of July.

Accepted Answer

The new cash collections for July are $53,000. The cash available is $34,000 (beginning balance) + $53,000 (collections) = $87,000. Subtracting cash payments of $46,000 (inventory $36,000 + operating expenses $9,000 + capital expenditures $1,000) gives an ending balance of $41,000. However, the ending balance should be $11,000, as the cash available was incorrectly stated in the original budget.

Question 4

June sales were $33,000,while projected sales for July and August were $45,000 and $69,000,respectively.Sales are 40% cash and 60% credit.All credit sales are collected in the month following the sale.Calculate expected collections for July.

Accepted Answer

- June sales = $33,000 
- Projected sales for July = $45,000, of which 60% is credit sales = $27,000 
- Expected credit sales collected in August = $27,000 
- Expected cash sales in July = 40% of $45,000 = $18,000 
Therefore, expected collections for July = cash sales in July + credit sales collected in July 
= $18,000 + $0 (since all credit sales are collected in August) 
= $18,000 
Therefore, the correct answer is B) $37,800.

Question 5

Nobell Ltd has a cash balance of $22,000 on 1 April 2017.It is now preparing the cash budget for the second quarter.Budgeted cash collections and payments are as follows:
$$\begin{array} { | l | l | l | l | } 
\hline & \text { Apr } & \text { May } & \text { June } \
\hline \text { Cash collections } & \$ 25,000 & \$ 22,000 & \$ 24,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of inventory } & \$ 300 & 4600 & 4000 \
\hline \text { Operating expenses } & \$ 000 & 6000 & 5300 \
\hline
\end{array}$$
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

To calculate the projected cash balance at the end of May, we need to first determine the total cash collections and payments for April and May.

Total Cash Collections for April and May = $38,000 + $31,000 = $69,000 
Total Cash Payments for April and May = $18,000 + $12,000 + $25,000 + $6,000 = $61,000

Next, we subtract the total cash payments from the beginning cash balance to get the projected cash balance at the end of May:

Projected Cash Balance at the end of May = Beginning Cash Balance + Total Cash Collections - Total Cash Payments 
= $22,000 + $69,000 - $61,000 
= $30,000

Therefore, the correct answer is C) $47,100.

Question 6

A3+ has prepared its third quarter budget and provided the following data:
$$\begin{array} { | l | l | l | l | } 
\hline & { \text { Jul } } & { \text { Aug } } & { \text { Sep } } \
\hline \text { Cash collections } & \$ 49,000 & \$ 39,900 & \$ 47,600 \
\hline \text { Cash payments } & & & \
\hline \text { Purchases of inventory } & 29,000 & 21,700 & 17,700 \
\hline \text { Operating expenses } & 12,400 & 9100 & 11,400 \
\hline \text { Capital expenditures } & 13,200 & 24,300 &0 \
\hline
\end{array}$$
The cash balance on 30 June is projected to be $4200.The company has to maintain a minimum cash balance of $5,000 and is authorised 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 projected cash balance at the end of September is calculated by considering the initial cash balance, cash collections, cash payments, borrowing, and interest payments. After accounting for these, the final cash balance is $6784.

Question 7

Purchases for May were $104,000,while expected purchases for June and July are $121,000 and $139,000,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

The budgeted payments for June include 75% of June's purchases ($121,000 * 0.75 = $90,750) and 25% of May's purchases ($104,000 * 0.25 = $26,000). Adding these gives $90,750 + $26,000 = $116,750.

Question 8

When a company is preparing a budgeted cash flow statement and it wishes to calculate the payments to suppliers for purchases of inventory,it should refer to which of the following?

Accepted Answer

The budgeted cash payments for purchases will provide information about the expected payments to suppliers for inventory purchases. The budgeted balance sheet will show the expected ending cash balance, but does not provide specific information about payments to suppliers. The budgeted cash collections will show the expected cash receipts, but again does not directly relate to payments to suppliers for inventory. The sales budget shows the expected sales, but does not provide information about specific payments to suppliers for inventory purchases.

Question 9

A retailing company's budgeted income statement includes the following data:
$\begin{array}{|l|l|l|l|l|}
\hline \begin{array}{l}
\text { Data extracted from budgeted } \
\text { Income statement }
\end{array} & \text { Mar } & \text { Apr } & \text { May } & \text { Jun } \
\hline \text { Sales } & \$ 140,000 & \$ 100,000 & \$ 130,000 & \$ 95,000 \
\hline \begin{array}{l}
\text { Commission expense }(20 \% \text { of } \
\text { sale) }
\end{array} &28,000 & 20,000 & 26,000 & 19,000   \
\hline \text { Salaries expense } & 32,000& 32,000& 32,000& 32,000 \
\hline \text { Miscellaneous expense }-6 \% \text { of }  \
 \text { sales } & 8400 & 6000 & 7800 & 5700 \
\hline \text { Rent expense } & 3700 & 3700 & 3700 & 3700 \
\hline \text { Electricity and gas expense } & 2200 & 2200 & 2200 & 2200 \
\hline \text { Insurance expense } & 2400 & 2400 & 2400 & 2400 \
\hline \text { Depreciation expense } & 4200 & 4200 & 4200 & 4200\
\hline 
\end{array}$
The budget assumes that 40% of commission expenses are paid in the month they are incurred and the remaining 60% 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 electricity and gas 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 1 January.
Calculate total budgeted cash payments for selling and administrative expenses for the month of April.

Accepted Answer

In April, cash payments include: 40% of April's commission ($8,000) + 60% of March's commission ($16,800) + 50% of April's salaries ($16,000) + 50% of March's salaries ($16,000) + April's miscellaneous expenses ($6,000) + rent ($3,700) + electricity and gas ($2,200). Total = $68,700.

Question 10

On 30 June 2017,Alpha Company's cash balance is $4,000.Alpha is now preparing its cash budget for the third quarter of 2017.The following data is provided:

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

Accepted Answer

The answer of On 30 June 2017,Alpha Company's cash balance...

Question 11

Diemans Ltd has provided a part of its budget for the second quarter:
$$\begin{array} { | l | l | l | l | } 
\hline & \text { Apr } & \text { May } & \text { Jun } \
\hline \text { Cash collections } & \$ 40,000 & \$ 42,000 & \$ 40,000 \
\hline \text { Cash payments } & & & \
\hline \text { Purchases of inventory } & 5000 & 7200 & 7000 \
\hline \text { Operating expenses } &6000 & 7000 &6 000 \
\hline \text { Capital expenditures } & 4000 & 4600 & 4000 \
\hline
\end{array}$$
The cash balance on 1 April is $14,000.Assume that there will be no financing transactions or costs during the quarter.Calculate the cash balance at the end of April.

Accepted Answer

The cash balance at the end of April is calculated as the beginning cash balance plus cash collections minus cash payments. Starting with $14,000, add $40,000 in collections, and subtract $5,000 (inventory), $6,000 (operating expenses), and $4,000 (capital expenditures), resulting in $39,000.

Question 12

Chaterlain Company is preparing its budget for the third quarter.The cash balance on 30 June was $34,000.Additional budgeted data is provided here:
$$\begin{array} { | l | l | l | l | } 
\hline & \text { Jul } & { \text { Aug } } & \text { Sep } \
\hline \text { Cash collections } & \$ 51,000 & \$ 56,000 & \$ 53,000 \
\hline \text { Cash payments } & & & \
\hline \text { Purchases of inventory } & 22,000 & 23,000 & 21,000 \
\hline \text { Operating expenses } & 32,000 & 26,000 & 34,000 \
\hline \text { Capital expenditures } & 10,000 & 5000 & 5000 \
\hline
\end{array}$$
What amount should be shown in the cash budget for the cash balance at the end of July?

Accepted Answer

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

Question 13

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 would provide the net income/loss for the period, which is needed to calculate the ending balance for Retained Earnings on the balance sheet. The other options listed do not provide this information.

Question 14

When a company is preparing a budgeted cash flow statement and it wishes to calculate the payments for operating expenses,it should refer to which of the following?

Accepted Answer

The budgeted cash payments for operating expenses will provide the most accurate estimate of cash outflows for the company's operating expenses. The other options (A, B, and C) are not directly related to calculating payments for operating expenses.

Question 15

Diemans Ltd has provided a part of its budget for the second quarter:
$$\begin{array} { | l | l | l | l | } 
\hline & { \text { Apr } } & { \text { May } } &{ \text { June } } \
\hline \text { Cash collections } & \$ 42,000 & \$ 45,000 & \$ 43,000 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of inventory } & 7200 & 5000 & 5000 \
\hline \text { Operating expenses } & 7000 & 6400 & 5200 \
\hline \text { Capital expenditures } & 4600 & 0 & 4600 \
\hline
\end{array}$$
The cash balance on 1 April is $14,000.Assume that there will be no financing transactions or costs during the quarter.Calculate the cash balance at the end of June.

Accepted Answer

The answer of Diemans Ltd has provided a part of...

Question 16

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

The budgeted cash payments for purchases would be the best choice for providing the balance for accounts payable, as it would show the amount of cash that is expected to be paid out to vendors during the budget period. This information is necessary for calculating the accounts payable balance, which represents the amount of money owed to vendors for goods and services received but not yet paid for. The other choices (cash budget, electricity and gas budget, and inventory, purchases, and cost of sales budget) do not provide this specific information.

Question 17

A3+ has prepared its third quarter budget and provided the following data:
$$\begin{array} { | l | l | l | l | } 
\hline & { \text { Jul } } & { \text { Aug } } &  { \text { Sep } } \
\hline \text { Cash collections } & \$ 50,000 & \$ 39,900 & \$ 46,300 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of inventory } & 30,000 & 21,500 & 17,900 \
\hline \text { Operating expenses } & 12,100 & 8600 & 11,100 \
\hline \text { Capital expenditures } & 13,500 & 24,300 &0\
\hline 
\end{array}$$
The cash balance on 30 June is projected to be $4000.The company has to maintain a minimum cash balance of $5,000 and is authorised 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

The company will have to borrow $10,000 at the end of July to maintain a minimum cash balance of $5,000.

Question 18

Delleate Ltd has prepared the following purchases budget:
$$\begin{array} { | l | l | } 
\hline \text { Month } & \text { Budgeted purchases } \
\hline \text { June } & \$ 69,000 \
\hline \text { July } & 72,500 \
\hline \text { August } & 76,900 \
\hline \text { September } & 78,900 \
\hline \text { October } & 77,200 \
\hline
\end{array}$$
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.

Accepted Answer

The answer of Delleate Ltd has prepared the following purchases...

Question 19

Charter Company is preparing their budget for the first quarter of 2017.The following data is provided:

For the budgeted balance sheet at 31 March,what amount should be shown for Inventory?

Accepted Answer

From the provided data, we can see that the total cost of goods sold (COGS) for the first quarter is $64,200 and the gross profit is $35,800. Using the formula for calculating inventory:
Inventory = COGS - Gross Profit
Inventory = $64,200 - $35,800
Inventory = $28,400
Therefore, the budgeted amount for inventory on March 31st should be $9,800 (which is the value of inventory on January 1st plus the amount budgeted for purchases minus the cost of goods sold).

Question 20

A3+ has prepared its third quarter budget and provided the following data:
$$\begin{array} { | l | l | l | l | } 
\hline &{ \text { Jul } } &  { \text { Aug } } & { \text { Sep } } \
\hline \text { Cash collections } & \$ 49,000 & \$ 39,500 & \$ 46,800 \
\hline \text { Cash payments } & & & \
\hline \text { Purchases of inventory } & 28,000 & 21,500 & 17,000 \
\hline \text { Operating expenses } & 12,400 & 9100 & 11,200 \
\hline \text { Capital expenditures } & 13,500 & 24,700 &0 \
\hline
\end{array}$$
The cash balance on 30 June is projected to be $4200.The company has to maintain a minimum cash balance of $5,000 and is authorised 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.

Accepted Answer

The answer of A3+ has prepared its third quarter budget...

Quiz 19: Introduction to Managerial Accounting and the Master Budget