Question 1

Long-term liability data for the budgeted balance sheet is derived from:

Accepted Answer

Long-term liability data for the budgeted balance sheet is derived from the cash budget, which provides information on inflows and outflows of cash, and the capital expenditures budget, which estimates the cost of long-term assets that will be purchased in the future. Therefore, the best choice is A. The sales budget, production budget, asset budget, and debt budget do not provide information on long-term liabilities. The budgeted income statement may provide information on interest expense related to long-term liabilities but does not provide data on the liabilities themselves.

Question 2

When preparing the cash budget, all the following should be considered except:

Accepted Answer

Depreciation expense is a non-cash expense and should not be included in the cash budget.

Question 3

Northern Company is preparing a cash budget for June. The company has $12,000 cash at the beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during June. Northern Company has an agreement with its bank to maintain a cash balance of at least $10,000. As of May 31, the company owes $15,000 to the bank. To maintain the $10,000 required balance, during June the company must:

Accepted Answer

To maintain the $10,000 required balance, Northern Company must have at least $22,000 ($10,000 required balance + $12,000 beginning cash balance) available at the beginning of June. However, the company only expects to have $30,000 in cash receipts during June. Therefore, the company must borrow an additional $2,500 ($22,000 - $19,500 expected cash balance) to maintain the required cash balance of $10,000.

Question 4

Kabuki Company's policy is to have 16% of the next month's sales as desired ending inventory. Estimated sales are shown in the table below. Given this data, what is Kabuki's estimated purchases for April?
$$\begin{array} { l l l l } 
& \text { March } & \text { April } & \text { May } \
\text { Expected Sales Units } & 9,400 & 8,900 & 7,300
\end{array}$$

Accepted Answer

To calculate the estimated purchases for April, we need to consider the desired ending inventory for April and the beginning inventory for April. The desired ending inventory for April is 16% of May's sales, which is 0.16 * 7,300 = 1,168 units. The beginning inventory for April is the ending inventory for March, which is 16% of April's sales, or 0.16 * 8,900 = 1,424 units. The formula for purchases is: Purchases = (Sales + Ending Inventory) - Beginning Inventory. Therefore, Purchases = (8,900 + 1,168) - 1,424 = 8,644 units.

Question 5

A company's gross profit rate is 30% of sales. Expected January sales are $78,000 and desired January 31^st inventory is $7,500. Assuming the December 31^st inventory is $6,200 what amount of purchases should this company budget for the month of January?

Accepted Answer

Step 1: Calculate the cost of goods sold

Beginning Inventory (Dec. 31) = $6,200

Desired Ending Inventory (Jan. 31) = $7,500

Cost of Goods Sold = (Expected Sales x Gross Profit Rate) - Gross Profit

Cost of Goods Sold = ($78,000 x 0.30) - $23,400

Cost of Goods Sold = $4,200

Cost of Goods Available for Sale = Beginning Inventory + Purchases

$4,200 = $6,200 + Purchases

Purchases = $4,200 - $6,200

Purchases = -$2,000 (Note: This means that the company had excess inventory at the end of January, which is unlikely. Therefore, we need to recalculate the answer using the cost of goods sold and desired ending inventory.)

Step 2: Recalculate Purchases

Cost of Goods Sold = $4,200

Desired Ending Inventory (Jan. 31) = $7,500

Cost of Goods Available for Sale = Beginning Inventory + Purchases

$11,700 = $6,200 + Purchases

Purchases = $11,700 - $6,200

Purchases = $5,500

Therefore, the company should budget $5,500 for purchases in the month of January.

Option B is the closest to the calculated answer.

Question 6

Kabuki Company's policy is to have 16% of the next month's sales as desired ending inventory. Estimated sales are shown in the table below. Given this data, what is Kabuki's estimated purchases for March?

Accepted Answer

To solve for the estimated purchases, we need to determine the desired ending inventory for March. 
Desired ending inventory = 16% of March's sales 
= 16% * $58,500 
= $9,360

To calculate the estimated purchases for March, we use the following formula: 
Estimated purchases = Cost of goods sold + Desired ending inventory - Beginning inventory

We are not given beginning inventory, so we cannot calculate the cost of goods sold. However, we do have the information that the cost of goods sold is 70% of sales. 
Cost of goods sold = 70% * $58,500 
= $40,950

Using this information, we can now calculate the estimated purchases as follows: 
Estimated purchases = $40,950 + $9,360 - Beginning inventory

We don't know the beginning inventory, but we can eliminate answer choices A, C, D, and E because they all result in estimated purchases that are too low. 
Plug in option B: 
$40,950 + $9,360 - $40,990 = $9,320

Therefore, the best choice is B.

Question 7

A Company is preparing a cash budget for June. The company has $67,000 cash at the beginning of June and anticipates $82,330 in cash receipts and $93,520 in cash disbursements during June. This company has an agreement with its bank to maintain a cash balance of at least $65,000. As of May 31, the company owes $25,000 to the bank. To maintain the $65,000 required balance, during June the company must:

Accepted Answer

To maintain the required cash balance of $65,000, the company needs to have at least $65,000 in cash at the end of June.

Starting cash balance (June 1): $67,000 
Add cash receipts: $82,330 
Total cash available: $149,330

Subtract cash disbursements: $93,520 
Projected ending cash balance (June 30) before meeting the bank requirement: $55,810

Since the projected ending cash balance is below the required minimum balance of $65,000, the company needs to borrow the difference, which is:

$65,000 - $55,810 = $9,190

Therefore, the company must borrow $9,190 during June.

Question 8

Julia's Candy Co. reports the following information from its sales account and sales budget:
$\begin{array}{lr}
\text { Sales }&\text { May } & \$ 105,000 \
&\text { June } & 93,000\\
\text { Expected }&\text { July } & \$ 90,000 \
\text { Sales: } \
&\text { August } & 110,000 \
&\text { September } & 120,000
\end{array}$
Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale.
-Based on the information from Julia's, the total amount of cash expected to be received from customers in July is:

Accepted Answer

The answer of  Julia's Candy Co. reports the following...

Question 9

A managerial accounting report that presents predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period is called a(n):

Accepted Answer

A budgeted balance sheet is a managerial accounting report that presents the predicted amounts of a company's assets, liabilities, and equity as of the end of the budget period. A rolling balance sheet refers to a balance sheet that is constantly updated to reflect changes, while a continuous balance sheet is similar to a rolling balance sheet but refers more specifically to a balance sheet that shows the company's financial position as of a particular point in time. A cash balance sheet focuses specifically on the company's cash and cash equivalents, while an operating balance sheet shows the company's financial position based on its operations.

Question 10

Lara Company has budgeted the following credit sales during the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for the credit sales is received as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. How much cash can Lara Company expect to collect in November as a result of current and past credit sales?

Accepted Answer

To calculate the cash collection in November, we need to calculate the cash collection for each month and then add up the collections for the particular month.

Cash collection for September credit sales:
15% of $25,000 = $3,750 (received in September)
60% of $25,000 = $15,000 (received in October)
20% of $25,000 = $5,000 (received in November)
5% of $25,000 = $1,250 (uncollectible)
Total cash collection for September credit sales = $18,750

Cash collection for October credit sales:
15% of $36,000 = $5,400 (received in October)
60% of $36,000 = $21,600 (received in November)
20% of $36,000 = $7,200 (received in December)
5% of $36,000 = $1,800 (uncollectible)
Total cash collection for October credit sales = $34,200

Cash collection for November credit sales:
15% of $30,000 = $4,500 (received in November)
60% of $30,000 = $18,000 (received in December)
20% of $30,000 = $6,000 (received in January)
5% of $30,000 = $1,500 (uncollectible)
Total cash collection for November credit sales = $28,500

Cash collection for December credit sales:
15% of $32,000 = $4,800 (received in December)
60% of $32,000 = $19,200 (received in January)
20% of $32,000 = $6,400 (received in February)
5% of $32,000 = $1,600 (uncollectible)
Total cash collection for December credit sales = $31,200

Therefore, the total cash collection in November as a result of current and past credit sales is $18,750 + $34,200 + $28,500 = $81,450. However, the question asks for the cash collection in November only, which is $28,500. Therefore, the correct answer is D.

Question 11

Julia's Candy Co. reports the following information from its sales account and sales budget:
$\begin{array}{lr}
\text { Sales }&\text { May } & \$ 105,000 \
&\text { June } & 93,000\\
\text { Expected }&\text { July } & \$ 90,000 \
\text { Sales: } \
&\text { August } & 110,000 \
&\text { September } & 120,000
\end{array}$
Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale.
-If Julia's pays sales commission of 10% each month, in addition to fixed costs of $4,000, calculate the selling expenses for the third quarter.

Accepted Answer

The answer of  Julia's Candy Co. reports the following...

Question 12

A plan that shows the expected cash inflows and cash outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans, is called a(n):

Accepted Answer

A cash budget shows the expected cash inflows and outflows during a budget period, including loans and repayments. It is used to ensure there is enough cash to cover expenses and to plan for any needed financing. The other budget types listed focus on different aspects of financial planning and do not address cash flow in the same way.

Question 13

In preparing financial budgets:

Accepted Answer

The budgeted balance sheet is usually prepared last because it is dependent on other budgets, such as the cash budget and the capital expenditures budget.

Question 14

Julia's Candy Co. reports the following information from its sales account and sales budget:
$\begin{array}{lr}
\text { Sales }&\text { May } & \$ 105,000 \
&\text { June } & 93,000\\
\text { Expected }&\text { July } & \$ 90,000 \
\text { Sales: } \
&\text { August } & 110,000 \
&\text { September } & 120,000
\end{array}$
Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale.
-Based on the information from Julia's, the total amount of cash expected to be received from customers in September is:

Accepted Answer

The answer of  Julia's Candy Co. reports the following...

Question 15

Lara Company has budgeted the following credit sales during the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for the credit sales is received as follows: 20% in the month of sale, 60% in the first month after sale, and 20% in the second month after sale. What will be the balance in Accounts Receivable at the end of November?

Accepted Answer

The answer of Lara Company has budgeted the following credit...

Question 16

Which budget must be completed after a cash budget is prepared?

Accepted Answer

The budgeted income statement must be completed after the cash budget is prepared, as the cash budget provides information on expected cash inflows and outflows, which are used to project the company's net income for the budgeted period. The other budgets listed (capital expenditures, sales, merchandise purchases, general and administrative expenses) may be completed before or after the cash budget, depending on the company's specific budgeting process.

Question 17

A managerial accounting report that presents predicted amounts of the company's revenues and expenses for the budget period is called a:

Accepted Answer

A managerial accounting report that presents predicted amounts of the company's revenues and expenses for the budget period is called a budgeted income statement. It provides an estimate of how the company's operating activities will impact its profitability during the budget period.

Question 18

Which of the following would not be used in preparing a cash budget for October?

Accepted Answer

The estimated depreciation expense for October is a non-cash expense and thus would not be included in a cash budget. The other choices all involve cash inflows or outflows and would be relevant to preparing a cash budget.

Question 19

In preparing a budgeted balance sheet, the amount for Accounts Receivable is primarily determined from:

Accepted Answer

The amount for Accounts Receivable is primarily determined from the sales budget, which estimates the amount of credit sales that will be made during the budget period. This information is then used to estimate the ending balance in Accounts Receivable on the budgeted balance sheet.

Question 20

A company reports the following information from its sales account and sales budget: 
$\begin{array}{lr}
\text { Sales }&\text { May } & \$52,000 \
&\text { June } & 47,000\\
\text { Expected }&\text { July } & \$ 45,000 \
\text { Sales: } \
&\text { August } & 55,000 \
&\text { September } & 60,000
\end{array}$
Cash sales are normally 30% of total sales and all credit sales are expected to be collected in the month following the date of sale. The total amount of cash expected to be received from customers in September is:

Accepted Answer

The answer of A company reports the following information from...

Quiz 20: Master Budgets and Performance Planning

Long-term liability data for the budgeted balance sheet is derived from:

When preparing the cash budget, all the following should be considered except:

A company's gross profit rate is 30% of sales. Expected January sales are $78,000 and desired January 31^st inventory is $7,500. Assuming the December 31^st inventory is $6,200 what amount of purchases should this company budget for the month of January?

Kabuki Company's policy is to have 16% of the next month's sales as desired ending inventory. Estimated sales are shown in the table below. Given this data, what is Kabuki's estimated purchases for March?

A managerial accounting report that presents predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period is called a(n) :

A plan that shows the expected cash inflows and cash outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans, is called a(n) :

In preparing financial budgets:

Which budget must be completed after a cash budget is prepared?

A managerial accounting report that presents predicted amounts of the company's revenues and expenses for the budget period is called a:

Which of the following would not be used in preparing a cash budget for October?

In preparing a budgeted balance sheet, the amount for Accounts Receivable is primarily determined from:

Quiz 20: Master Budgets and Performance Planning

Long-term liability data for the budgeted balance sheet is derived from:

When preparing the cash budget, all the following should be considered except:

A company's gross profit rate is 30% of sales. Expected January sales are $78,000 and desired January 31st inventory is $7,500. Assuming the December 31st inventory is $6,200 what amount of purchases should this company budget for the month of January?

Kabuki Company's policy is to have 16% of the next month's sales as desired ending inventory. Estimated sales are shown in the table below. Given this data, what is Kabuki's estimated purchases for March?

A managerial accounting report that presents predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period is called a(n) :

A plan that shows the expected cash inflows and cash outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans, is called a(n) :

In preparing financial budgets:

Which budget must be completed after a cash budget is prepared?

A managerial accounting report that presents predicted amounts of the company's revenues and expenses for the budget period is called a:

Which of the following would not be used in preparing a cash budget for October?

In preparing a budgeted balance sheet, the amount for Accounts Receivable is primarily determined from:

A company's gross profit rate is 30% of sales. Expected January sales are $78,000 and desired January 31^st inventory is $7,500. Assuming the December 31^st inventory is $6,200 what amount of purchases should this company budget for the month of January?