Q&A Hero

Q: Miles Company is preparing a cash budget for February. The company has $30,000 cash at the beginning of February and anticipates $75,000 in cash receipts and $96,250 in cash disbursements during February. Miles Company has an agreement with its bank to maintain a cash balance of $10,000. What amount, if any, must the company borrow during February to maintain a $10,000 cash balance?

Q: Cambridge, Inc., is preparing its master budget for the quarter ended June 30. It sells a single product for $40 each. Sales are 60% cash and 40% on credit. All credit sales are collected in the month following the sale. At March 31, the balance in accounts receivable is $12,000, which represents the uncollected balance on March sales. Budgeted sales for the next four months follow: April May June July Sales in Units .. 800 1,000 600 1,200 The product cost is $20 per unit, and desired ending inventory is 60% of the following month's sales in units. Inventory at March 31 is 480 units. Purchases are paid 50% in the month of purchase and 50% in the following month. At March 31, the balance in accounts payable is $11,000, which represents the unpaid purchases from March. Operating expenses are paid in the month incurred and consist of: Commissions (10% of sales) Shipping (3% of sales) Office salaries ($3,000 per month) Rent ($5,000 per month) Depreciation is $2,000 per month. Income taxes are 40%, and will be paid on July 1. There are no taxes payable at March 31. A minimum cash balance of $12,000 is required, and the beginning cash balance is $12,000. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning of the month loan balance and is paid at each month end. If an excess balance of cash exists, loans are repaid at the end of the month. At March 31, the loan balance is $2,000. Prepare a master budget (round all dollar amounts to the nearest whole dollar) for each of the months of April, May, and June that includes the: Sales budget Table of cash receipts Merchandise purchases budget Table of cash disbursements for purchases of merchandise Table of cash disbursements for selling and administrative expenses Cash budget, including information on the loan balance Budgeted income statement

Q: Tappet Corporation is preparing its master budget for the quarter ending March 31. It sells a single product for $25 a unit. Budgeted sales are 40% cash and 60% on credit. All credit sales are collected in the month following the sales. Budgeted sales for the next four months follow: January February March April Sales in Units . 1,200 1,000 1,600 1,400 At December 31, the balance in accounts receivable is $10,000, which represents the uncollected portion of December sales. The company desires merchandise inventory equal to 30% of the next month's sales in units. The December 31 balance of merchandise inventory is 340 units, and inventory cost is $10 per unit. Forty percent of the purchases are paid in the month of purchase and 60% are paid in the following month. At December 31, the balance of Accounts Payable is $8,000, which represents the unpaid portion of December's purchases. Operating expenses are paid in the month incurred and consist of: Sales commissions (10% of sales) Freight (2% of sales) Office salaries ($2,400 per month) Rent ($4,800 per month) Depreciation expense is $4,000 per month. The income tax rate is 40%, and income taxes will be paid on April 1. A minimum cash balance of $10,000 is required, and the cash balance at December 31 is $10,200. Loans are obtained at the end of a month in which a cash shortage occurs. Interest is 1% per month, based on the beginning of the month loan balance, and must be paid each month. If an excess of cash exists, loan repayments are made at the end of the month. At December 31, the loan balance is $0. Prepare a master budget (round all dollar amounts to the nearest whole dollar) for each of the months of January, February, and March that includes the: Sales budget Table of cash receipts Merchandise purchases budget Table of cash disbursements for merchandise purchases Table of cash disbursements for selling and administrative expenses Cash budget, including information on the loan balance Budgeted income statement

Q: Pantheon Company has prepared the following forecasts of monthly sales: July August September October Sales (in Units) .. 4,500 5,300 4,000 3,700 Pantheon has decided that the number of units in its inventory at the end of each month should equal 25% of the next month's sales. The budgeted cost per unit is $30. (1) How many units should be in July's beginning inventory? (2) What amount should be budgeted for the cost of merchandise purchases in July? (3) How many units should be purchased in September?

Q: Nano, Inc. is preparing its budget for the second quarter. The following sales data have been forecasted: April May June July August Unit sales.. 640 720 780 620 660 Additional information follows: Inventory on March 31: 192 Units Desired ending inventory each month: 30% of next month's sales How many units should be purchased in April, May, and June? How many units should be purchased in the second quarter in total?

Q: In preparing a budget for the last three months of the current year, Urban Company is planning the units of merchandise it must order each month. The company's policy is to have 15% of the next month's sales in its inventory at the end of each month. Projected sales for October, November, and December are 27,000 units, 29,500 units, and 32,500 units, respectively. How many units must be ordered in November?

Q: A department store has budgeted cost of goods sold for August of $60,000 for its women's coats. Management wants to have $12,000 of coats in inventory at the end of the month to prepare for the winter season. Beginning inventory in August was $8,000. What dollar amount of coats should be purchased to meet the above plans?

Q: What is a cash budget? How can management use a cash budget?

Q: What is a merchandise purchases budget? How is the merchandise purchases budget constructed?

Q: Briefly describe a master budget and the sequence in which the individual budgets within the master budget are prepared.

Q: List the three important guidelines that should be followed in the budgeting process.

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Q: Grafton budgets production of 300 units in June and 310 units in July. Each unit requires 1.5 hours of direct labor. The direct labor rate if $14 per hour. The indirect labor rate is $21.00 per hour. Compute the budgeted direct labor cost for July. A. $6,300. B. $6,510. C. $9,450. D. $9,765. E. $16,275.

Q: Grafton budgets production of 300 units in June and 310 units in July. Each finished unit requires 4 pounds of raw material K, which costs $5 per pound. Each months ending inventory of raw materials should be 30% of the following months budgeted production. The June 1 raw materials inventory has 360 pounds of raw material K. Compute budgeted purchases for raw material K for June. A. 1,200 lbs. B. 1,240 lbs. C. 1,212 lbs. D. 1,220 lbs. E. 880 lbs.

Q: Keegan Company manufactures a single product and has a JIT policy that ending inventory must equal 10% of the next months sales. It estimates that Mays ending inventory will consist of 20,000 units. June and July sales are estimated to be 280,000 and 290,000 units, respectively. Compute the number of units to be produced that would appear on the companys production budget for the month of June. A. 288,000. B. 260,000. C. 289,000. D. 280,000. E. 309,000.

Q: Use the following information to determine the ending cash balance to be reported on the month ended June 30 cash budget. a. Beginning cash balance on June 1, $94,000. b. Cash receipts from sales, $413,000. c. Budgeted cash disbursements for purchases, $268,000. d. Budgeted cash disbursements for salaries, $95,000. e. Other budgeted expenses, $57,000. f. Cash repayment of bank loan, $32,000. g. Budgeted depreciation expense, $34,000. A. $55,000. B. $21,000. C. $87,000. D. $112,000. E. $78,000.

Q: Kent Companys May sales budget calls for sales of $900,000. The store expects to begin May with $50,000 of inventory and to end the month with $55,000 of inventory. Gross margin is typically 45% of sales. Compute the budgeted cost of merchandise purchases for May. A. $550,000. B. $500,000. C. $495,000. D. $460,000. E. $490,000.

Q: Kyoto, Inc. predicts the following sales in units for the coming four months: April May June June Sales in Units .. 240 280 300 240 Although each month's ending inventory of finished units should be 60% of the next month's sales, the March 31 finished goods inventory is only 100 units. A finished unit requires five pounds of raw material B. The March 31 raw materials inventory has 200 pounds of B. Each month's ending inventory of raw materials should be 30% of the following month's production needs. The budgeted purchases of pounds of raw material B during May should be: A. 1,418 lb. B. 1,460 lb. C. 1,502 lb. D. 264 lb. E. 283 lb.

Q: Kyoto, Inc. predicts the following sales in units for the coming four months: April May June June Sales in Units .. 240 280 300 240 Although each month's ending inventory of finished units should be 60% of the next month's sales, the March 31 finished goods inventory is only 100 units. A finished unit requires five pounds of raw material B. The March 31 raw materials inventory has 200 pounds of B. Each month's ending inventory of raw materials should be 30% of the following month's production needs. The budgeted production for May is: A. 200 units. B. 212 units. C. 268 units. D. 280 units. E. 292 units.

Q: A plan that states the number of units to be manufactured during each future period covered by the budget, based on the budgeted sales for the period and the levels of inventory needed to support future sales, is the: A. Sales budget. B. Merchandise purchases budget. C. Production budget. D. Cash budget. E. Manufacturing budget.

Q: Which of the following budgets is part of the manufacturing budget? A. Sales budget. B. Direct materials budget. C. Production budget. D. Merchandise purchases budget. E. Cash budget.

Q: To determine the production budget for an accounting period, consideration is given to all of the following except: A. Budgeted ending inventory. B. Budgeted beginning inventory. C. Budgeted sales. D. Budgeted overhead. E. Ratio of inventory to future sales.

Q: A plan that shows the predicted costs for direct materials, direct labor, and overhead to be incurred in manufacturing the units in the production budget is called the: A. Sales budget. B. Merchandise purchases budget. C. Production budget. D. Rolling budget. E. Manufacturing budget.

Q: Berkley Co.'s sales are 10% for cash and 90% on credit. Credit sales are collected as follows: 30% in the month of sale, 50% in the next month, and 20% in the following month. On December 31, the accounts receivable balance includes $12,000 from November sales and $42,000 from December sales. Assume that total sales for January and February are budgeted to be $50,000 and $100,000, respectively. What are the expected cash receipts for February from current and past sales? A. $80,500. B. $71,500. C. $34,500. D. $61,500. E. $59,500.

Q: Berkley Co.'s sales are 10% cash and 90% on credit. Credit sales are collected as follows: 30% in the month of sale, 50% in the next month, and 20% in the following month. On December 31, the accounts receivable balance includes $12,000 from November sales and $42,000 from December sales. Assume that total sales for January are budgeted to be $50,000. What are the expected cash receipts for January from the current and past sales? A. $18,500. B. $51,500. C. $51,900. D. $55,500. E. $60,500.

Q: Harold's expects its September sales to be 20% higher than its August sales of $150,000. Purchases were $100,000 in August and are expected to be $120,000 in September. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Merchandise purchases are paid as follows: 25% in the month of purchase and 75% in the following month. The beginning cash balance on September 1 is $7,500. The ending cash balance on September 30 would be: A. $31,500. B. $67,500. C. $54,000. D. $61,500. E. $136,500.

Q: A company's history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit sales are 30% in the month of the sale, 50% in the next month, and 15% the following month. Projected sales for January, February, and March are $60,000, $85,000 and $95,000, respectively. The March expected cash receipts from all current and prior credit sales is: A. $57,000 B. $63,080 C. $64,000 D. $80,750 E. $90,250

Q: A company's history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit sales are 20% in the month of the sale, 50% in the next month, 25% the following month, and 5% is uncollectible. Projected sales for December, January, and February are $60,000, $85,000 and $95,000, respectively. The February expected cash receipts from all current and prior credit sales is: A. $57,000 B. $61,200 C. $66,400 D. $80,750 E. $90,250

Q: In preparing financial budgets: A. The budgeted balance sheet is usually prepared last. B. The cash budget is usually not prepared. C. The budgeted income statement is usually not prepared. D. The capital expenditures budget is usually prepared last. E. The merchandise purchases budget is the key budget.

Q: Long-term liability data for the budgeted balance sheet is derived from: A. The cash budget and capital expenditures budget. B. The cash budget and sales budget. C. The cash budget and budgeted income statement. D. The sales budget and production budget. E. The asset budget and debt budget.

Q: In preparing a budgeted balance sheet, the amount for Accounts Receivable is primarily determined from: A. The purchases budget. B. The sales budget. C. The capital expenditures budget. D. The budgeted income statement. E. The selling expenses budget.

Q: Lara Company's budget includes the following credit sales for 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? A. $19,700. B. $28,500. C. $30,000. D. $31,100. E. $33,900.

Q: A managerial accounting report that presents predicted amounts of the company's revenues and expenses for the budget period is called a: A. Budgeted income statement. B. Budgeted balance sheet. C. Master plan. D. Rolling income statement. E. Continuous income statement.

Q: Julia's Candy Co. reports the following information from its sales account and sales budget: Sales May $105,000 June 93,000 Expected Sales: July.. $90,000 August. 110,000 September 120,000 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. The total amount of cash expected to be received from customers in September is: A. $ 30,000. B. $ 82,500. C. $112,500. D. $120,000. E. $202,500.

Q: 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. Rolling balance sheet. B. Continuous balance sheet. C. Budgeted balance sheet. D. Cash balance sheet. E. Operating balance sheet.

Q: 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: A. Borrow $4,500. B. Borrow $2,500. C. Borrow $10,000. D. Repay $7,500. E. Repay $2,500.

Q: Which of the following would not be used in preparing a cash budget for October? A. Beginning cash balance on October 1. B. Budgeted sales and collections for October. C. Estimated depreciation expense for October. D. Budgeted salaries expense for October. E. Budgeted capital equipment purchases for October.

Q: Which of the following budgets must be completed before a cash budget can be prepared? A. Capital expenditures budget. B. Sales budget. C. Merchandise purchases budget. D. General and administrative expense budget. E. All of these budgets must be completed before the cash budget.

Q: Which of the following accounts would appear on a budgeted balance sheet? A. Income tax expense. B. Accounts receivable. C. Sales commissions. D. Depreciation expense. E. All of the choices are correct.

Q: 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): A. Capital expenditures budget. B. Operating budget. C. Rolling budget. D. Cash budget. E. Income statement.

Q: When preparing the cash budget, all the following should be considered except: A. Cash receipts from customers. B. Cash payments for merchandise. C. Depreciation expense. D. Cash payments for income taxes. E. Cash payments for capital expenditures.

Q: If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and budgeted cost of goods sold is $10,260, budgeted purchases should be: A. $ 860 B. $ 1,100 C. $ 1,960 D. $ 9,160 E. $11,360

Q: Stritch Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 20% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 30,000 units, 20,000 units, and 40,000 units, respectively. How many units must be purchased in September? A. 14,000. B. 20,000. C. 22,000. D. 24,000. E. 28,000.

Q: A quantity of merchandise or materials over the minimum needed that reduces the risk of running short is called: A. Just-in-time inventory. B. Budgeted stock. C. Continuous inventory. D. Capital stock. E. Safety stock.

Q: The sales budget for Carmel shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units. Budgeted purchases of Product B for the year would be: A. 24,500 units. B. 22,500 units. C. 16,500 units. D. 26,500 units. E. 20,500 units.

Q: The sales budget for Carmel shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units. Budgeted purchases of Product A for the year would be: A. 22,400 units. B. 20,400 units. C. 20,000 units. D. 19,500 units. E. 12,200 units.

Q: The sales budget for Carmel shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units. Total budgeted sales of both products for the year would be: A. $ 42,000. B. $200,000. C. $264,000. D. $464,000. E. $500,000.

Q: Fairway's April sales forecast projects that 6,000 units will sell at a price of $10.50 per unit. The desired ending inventory is 30% higher than the beginning inventory, which was 1,000 units. Budgeted purchases of units in April would be: A. 6,000 units. B. 7,000 units. C. 6,300 units. D. 7,300 units. E. Some other amount.

Q: Ecology Co. sells a biodegradable product called Dissol and has predicted the following sales for the first four months of the current year: Jan. Feb. March April Sales in Units .. 1,700 1,900 2,100 1,600 Ending inventory for each month should be 20% of the next month's sales, and the December 31 inventory is consistent with that policy. How many units should be purchased in February? A. 1,860. B. 1,900. C. 1,940. D. 1,980 E. 2,320.

Q: A sporting goods store purchased $7,000 of ski boots in October. The store had $3,000 of ski boots in inventory at the beginning of October, and expects to have $2,000 of ski boots in inventory at the end of October to cover part of anticipated November sales. What is the budgeted cost of goods sold for October? A. $ 5,000. B. $ 7,000. C. $ 8,000. D. $ 9,000. E. $10,000.

Q: A department store has budgeted sales of 12,000 men's suits in September. Management wants to have 6,000 suits in inventory at the end of the month to prepare for the winter season. Beginning inventory for September is expected to be 4,000 suits. What is the dollar amount of the purchase of suits? Each suit has a cost of $75. A. $ 750,000. B. $ 900,000. C. $1,050,000. D. $1,200,000. E. $1,350,000.

Q: Which of the following factors is least likely to be considered in preparing a sales budget? A. Plant capacity. B. General economic and industry conditions. C. Past sales volume. D. The capital expenditures budget. E. Proposed selling expenses, such as advertising.

Q: A plan that lists the types and amounts of selling expenses expected during the budget period is called a(n): A. Sales budget. B. Operating budget. C. Capital expenditures budget. D. Selling expense budget. E. Purchases budget.

Q: A plan showing the planned sales units and the revenue to be derived from these sales, and is the usual starting point in the budgeting process, is called the: A. Operating budget. B. Business plan. C. Income statement budget. D. Merchandise purchases budget. E. Sales budget.

Q: A plan that reports the units or costs of merchandise to be purchased by a merchandising company during the budget period is called a: A. Selling expenses budget. B. Merchandise purchases budget. C. Sales budget. D. Cash budget. E. Capital expenditures budget.

Q: A plan that lists dollar amounts to be received from disposing of plant assets and dollar amounts to be spent on purchasing additional plant assets is called a: A. Cash budget. B. Capital expenditures budget. C. Rolling budget. D. Sales budget. E. Production budget.

Q: A June sales forecast projects that 6,000 units are going to be sold at a price of $10.50 per unit. The desired ending inventory of units is 15% higher than the beginning inventory of 1,000 units. Total June sales are anticipated to be: A. $63,000. B. $67,500. C. $61,250. D. $74,250. E. $60,000.

Q: A plan that lists the types and amounts of operating expenses expected that are not included in the selling expenses budget is a: A. General and administrative expense budget. B. Sales budget. C. Cash payments budget. D. Overhead budget. E. Selling expense budget.

Q: A budget system based on expected activities and their levels that enables management to plan for resources required to perform the activities is: A. Traditional budgeting. B. Management budgeting. C. Master budgeting. D. Activity-based budgeting. E. Cash budgeting.

Q: Which of the following budgets is not an operating budget? A. Sales budget. B. Cash budget. C. General and administrative expense budget. D. Selling expenses budget. E. Merchandise purchases.

Q: The master budget process usually ends with: A. The production budget. B. The sales budget. C. The selling expense budget. D. The budgeted balance sheet. E. The overhead budget.

Q: The usual starting point for preparing a master budget is forecasting or estimating: A. Expenditures. B. Sales. C. Production. D. Income. E. Cash payments.

Q: The master budget includes: A. Operating budgets. B. A capital expenditures budget. C. A budgeted income statement. D. A cash budget. E. All of the budgets are included in the master budget.

Q: Financial budgets include all the following except the: A. Sales budget. B. Budgeted balance sheet. C. Budgeted income statement. D. Cash budget. E. All of these are financial budgets.

Q: Operating budgets include all the following budgets except the: A. Sales budget. B. Selling expense budget. C. Cash budget. D. Merchandise purchases budget. E. General and administrative expense budget.

Q: A comprehensive or overall formal plan for a business that includes specific plans for expected sales, the units of product to be produced, the merchandise or materials to be purchased, the expenses to be incurred, the long-term assets to be purchased, and the amounts of cash to be borrowed or loans to be repaid, as well as a budgeted income statement and balance sheet, is called a: A. Master budget. B. Cash budget. C. Capital expenditures budget. D. Rolling budget. E. Production budget.

Q: Assuming a bottom-up process of budget development, which of the following should be initially responsible for developing sales estimates? A. The budget committee. B. The accounting department. C. The sales department. D. Top management. E. The marketing department.

Q: The usual budget period is: A. An annual period of 250 working days. B. A monthly period separated into daily budgets. C. A quarterly period separated into weekly budgets. D. An annual period separated into weekly budgets. E. An annual period separated into quarterly and monthly budgets.

Q: The practice of preparing budgets for each of several future periods and revising those budgets as each period is completed, adding a new budget each period so that the budgets always cover the same number of future periods, is called: A. Participatory budgeting. B. Capital budgeting. C. Balanced budgeting. D. Continuous budgeting. E. Primary budgeting.

Q: The most useful budget figures are developed: A. From the "top-down". B. From the "bottom-up" following a participatory process. C. Solely by the budget committee. D. By the CEO. E. After the accounting period has begun.

Q: Guidance for preparing a master budget is usually the responsibility of: A. The company CEO. B. The marketing department. C. A budget committee. D. The chief financial officer. E. Lower level management.

Q: The set of periodic budgets that are prepared and periodically revised in the practice of continuous budgeting are called: A. Production budgets. B. Sales budgets. C. Cash budgets. D. Rolling budgets. E. Capital expenditures budgets.

Q: The overall coordinating activity of the budget process is the responsibility of the: A. Chief Accounting Officer. B. Chief Executive Officer (CEO). C. Chief Financial Officer (CFO). D. Budget Committee. E. Board of Directors.

Q: A budget is best described as: A. A formal statement of a company's future plans usually expressed in monetary terms. B. A master control device. C. An informal statement of companys future plans usually expressed in monetary terms. D. The most crucial component of a companys evaluation process. E. The minimum acceptable performance level.

Q: Which of the following statements about budgeting is false? A. Budgeting is an aid to planning and control. B. Budgets create standards for performance evaluation. C. Budgets help coordinate the activities of the entire organization. D. Budgeting forces managers to think ahead and formalize long-range objectives. E. The master budget should only be prepared by top management.

Q: Which of the following is a benefit derived from budgeting? A. Budgeting focuses management's attention on the future. B. Budgeting provides coordination of departments. C. Budgeting provides a basis for evaluating performance. D. Budgeting provides motivation for managers and employees. E. All of the choices are benefits derived from budgeting.

Q: Which of the following is not a result of following a well-designed budgeting process? A. Improved decision-making processes. B. Improved performance evaluations. C. Improved coordination of business activities. D. Assurance of future profits. E. All of these are benefits of effective budgeting.

Q: For budgets to be effective: A. Goals should be attainable. B. Employees affected by a budget should be consulted when it is prepared. C. Evaluations should be made carefully with opportunities to explain any failures. D. They should be properly applied to avoid negative effects. E. All of the options are correct.

Q: The process of planning future business actions and expressing them as a formal plan is called: A. Budgeting. B. Cost accounting. C. Managerial accounting. D. Variance analysis. E. Standard cost analysis.