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121. The cash budget reflects a. all revenues and all expenses for a period. b. expected cash receipts and cash disbursements from all sources. c. all the items that appear on a budgeted income statement. d. all the items that appear on a budgeted balance sheet. 122. The following credit sales are budgeted by Terra Co.: January $204,000 February 300,000 March 420,000 April 360,000 The company’s past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The anticipated cash inflow for the month of April is a. $370,320. b. $336,000. c. $360,000. d. $352,800. 123. Hyde Corp.’s cash budget showed total available cash less cash disbursements. What does this amount equal? a. Ending cash balance b. Total cash receipts c. The excess of available cash over cash disbursements d. The amount of financing required 124. Which one of the following sections would not appear on a cash budget? a. Cash receipts b. Financing c. Investing d. Cash disbursements 125. A company’s past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5% in the second month after the sale; the remainder is never collected. Budgeted credit sales were: January $360,000 February 216,000 March 540,000 The cash inflow in the month of March is expected to be a. $406,800. b. $307,800. c. $324,000. d. $388,800. 126. Which one of the following items would never appear on a cash budget? a. Office salaries expense b. Interest expense c. Depreciation expense d. Travel expense 127. Correy Inc. reported the following information for 2013: October November December Budgeted sales $460,000 $440,000 $540,000 Budgeted purchases $240,000 $256,000 $288,000 · All sales are on credit. · Customer amounts on account are collected 50% in the month of sale and 50% in the following month. · Cost of goods sold is 35% of sales. · Correy purchases and pays for merchandise 60% in the month of acquisition and 40% in the following month. · Accounts payable is used only for inventory acquisitions. How much cash will Correy receive during November? a. $220,000 b. $490,000 c. $450,000 d. $440,000 128. Correy Company reported the following information for 2013: October November December Budgeted sales $460,000 $440,000 $540,000 Budgeted purchases $240,000 $256,000 $288,000 · Cost of goods sold is 35% of sales. · Correy purchases and pays for merchandise 60% in the month of acquisition and 40% in the following month. · Accounts payable is used only for inventory acquisitions. How much is the budgeted balance for Accounts Payable at October 31, 2013? a. $96,000 b. $144,000 c. $204,000 d. $102,400 129. Petal Co. reported the following information for 2013: October November December Budgeted sales $930,000 $870,000 $1,080,000 · All sales are on credit. · Customer amounts on account are collected 50% in the month of sale and 50% in the following month. How much is the November 30, 2013 budgeted Accounts Receivable? a. $900,000 b. $540,000 c. $465,000 d. $435,000 130. Bean Manufacturing reported the following information for 2013: October November December Budgeted purchases $240,000 $256,000 $288,000 · Operating expenses are: Salaries, $100,000; Depreciation, $40,000; Rent, $20,000; Utilities, $28,000 · Operating expenses are paid during the month incurred. · Accounts payable is used only for inventory acquisitions. How much is the budgeted amount of cash to be paid for operating expenses in November? a. $404,000 b. $148,000 c. $188,000 d. $444,000 131. During September, the capital expenditure budget indicates a $420,000 purchase of equipment. The ending September cash balance from operations is budgeted to be $60,000. The company wants to maintain a minimum cash balance of $30,000. What is the minimum cash loan that must be planned to be borrowed from the bank during September? a. $330,000 b. $360,000 c. $450,000 d. $390,000 Ans: d, LO: 5, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Budget Preparation 132. Young Co. has budgeted its activity for December according to the following information: 1. Sales at $600,000, all for cash. 2. Budgeted depreciation for December is $15,000. 4. The cash balance at December 1 was $15,000. 5. Selling and administrative expenses are budgeted at $60,000 for December and are paid for in cash. 6. The planned merchandise inventory on December 31 and December 1 is $18,000. 7. The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid in cash. How much are the budgeted cash disbursements for December? a. $345,000 b. $510,000 c. $525,000 d. $492,000 133. Dex Industries expects to purchase $120,000 of materials in March and $140,000 of materials in April. Three-fourths of all purchases are paid for in the month of purchase, and the other one-fourth are paid for in the month following the month ofpurchase. In addition, a 2% discount is received for payments made in the month of purchase. How much will April’s cash disbursements for materials purchases be? a. $88,200 b. $108,200 c. $132,900 d. $120,000 134. On January 1, Witt Company has a beginning cash balance of $126,000. During the year, the company expects cash disbursements of $1,020,000 and cash receipts of $870,000. If Witt requires an ending cash balance of $120,000, Witt Company must borrow a. $96,000. b. $120,000. c. $144,000. d. $276,000. 135. Mapleview, Inc. has the following budgeted sales: July $200,000, August $300,000, and September $250,000. 40% of the sales are for cash and 60% are on credit. For the credit sales, 50% are collected in the month of sale, and 50% the next month. The total expected cash receipts during September are a. $280,000. b. $265,000. c. $262,500. d. $250,000. 136. Burr, Inc.’s direct materials budget shows total cost of direct materials purchases for April $400,000, May $480,000 and June $560,000. Cash payments are 60% in the month of purchase and 40% in the following month. The budgeted cash payments for June are a. $528,000. b. $512,000. c. $480,000. d. $416,000. 137. Which one of the following budgets would be prepared for a manufacturer but not for a merchandiser? a. Direct labor budget b. Cash budget c. Sales budget d. Budgeted income statement 138. The formula for determining budgeted merchandise purchases is budgeted a. production + desired ending inventory – beginning inventory. b. sales + beginning inventory – desired ending inventory. c. cost of goods sold + desired ending inventory – beginning inventory. d. cost of goods sold + beginning inventory – desired ending inventory. 139. Which one of the following is a problem resulting from a service company being overstaffed? a. Labor costs will be disproportionately low. b. Profits will be higher because of the additional salaries. c. Staff turnover may increase. d. Revenue may be lost. 140. The master budget for a service enterprise a. will have the same types of budgets as a merchandiser. b. may include a sales budget for sales revenue. c. will not include a budgeted income statement. d. includes a service revenue budget based on expected client billings. 141. Budgeting in not-for-profit organizations a. is not important because they are not profit-oriented. b. usually starts with budgeting expenditures, rather than receipts. c. is necessary only if some product is produced and sold. d. consists entirely of budgeted contributions. 142. For a merchandiser, the starting point in the development of the master budget is the a. cash budget. b. sales budget. c. selling and administrative expenses budget. d. budgeted income statement. 143. Instead of a production budget, a merchandiser will prepare a a. pseudo-production budget. b. merchandise purchases budget. c. master time sheet. d. sales forecast. 144. Orange Co. is a manufacturer and Pineapple Company is a merchandiser. What is the difference in the budgets the two entities will prepare? a. Orange Co. will prepare a production budget, and Pineapple Company will prepare a merchandise purchases budget. b. Orange Co. will prepare a sales forecast, and Pineapple Company will prepare a sales budget. c. Pineapple Company will prepare a production budget, and Orange Co. willprepare a merchandise purchases budget. d. Both companies will prepare the same types of budgets. 145. An appropriate activity index for a college or university for budgeting faculty positions would be the a. faculty hours worked. b. number of administrators. c. credit hours taught by a department. d. number of days in the school term. 146. A critical factor in budgeting for a service firm is to a. hire professional staff to perform the budgeting work. b. coordinate professional staff needs with anticipated services. c. classify all personnel as either variable or fixed. d. budget expenditures before anticipated receipts. 147. The primary benefits of budgeting include all of the following except it a. requires only top management to plan ahead and formalize theirfuture goals. b. provides definite objectives for evaluating performance. c. creates an early warning system for potential problems. d. motivates personnel throughout the organization. 148. The responsibility for expressing management’s budgeting goals in financial terms is performed by the a. accounting department. b. top management. c. lower level of management. d. budget committee. 149. Coordinating the preparation of the budget is the responsibility of the a. treasurer. b. president. c. chief accountant. d. budget committee. 150. For better management acceptance, the flow of input data for budgeting should begin with the a. accounting department. b. top management. c. lower levels of management. d. budget committee. 151. In the direct materials budget, the quantity of direct materials to be purchased is computed by adding direct materials required for production to a. desired ending direct materials. b. beginning direct materials. c. desired ending direct materials less beginning direct materials. d. beginning direct materials less desired ending direct materials. 152. Grey Company has 24,000 units in beginning finished goods. If sales are expected to be 120,000 units for the year and Grey desires ending finished goods of 30,000 units, how many units must the company produce? a. 114,000 b. 120,000 c. 126,000 d. 150,000 153. The important end-product of the operating budgets is the a. budgeted income statement. b. cash budget. c. production budget. d. budgeted balance sheet. 154. On January 1, Kale Company has a beginning cash balance of $42,000. During the year, the company expects cash disbursements of $340,000 and cash receipts of $290,000. If Kale requires an ending cash balance of $40,000, the company must borrow a. $32,000. b. $40,000. c. $48,000. d. $92,000. 155. The budget that is often considered to be the most importantfinancial budget is the a. cash budget. b. capital expenditure budget. c. budgeted income statement. d. budgeted balance sheet. 156. Lark Corp.’s direct materials budget shows total cost of direct materials purchases for January $250,000, February $300,000 and March $350,000. Cash payments are 60% in the month of purchase and 40% in the following month. The budgeted cash payments for March are a. $330,000. b. $320,000. c. $300,000. d. $260,000. 157. A purchases budget is used instead of a production budget by a. merchandising companies. b. service enterprises. c. not-for-profit organizations. d. manufacturing companies. 158. Which of the following statements is incorrect? a. A continuous twelve-month budget results from dropping the month just ended and adding a future month. b. The production budget is derived from the direct materials and direct labor budgets. c. The cash budget shows anticipated cash flows. d. In the budget process for not-for-profit organizations, the emphasis is on cash flow rather than on revenue and expenses.

121. The cash budget reflects

a. all revenues and all expenses for a period.

b. expected cash receipts and cash disbursements from all sources.

c. all the items that appear on a budgeted income statement.

d. all the items that appear on a budgeted balance sheet.

122. The following credit sales are budgeted by Terra Co.:

January $204,000

February 300,000

March 420,000

April 360,000

The company’s past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The anticipated cash inflow for the month of April is

a. $370,320.

b. $336,000.

c. $360,000.

d. $352,800.

123. Hyde Corp.’s cash budget showed total available cash less cash disbursements. What does this amount equal?

a. Ending cash balance

b. Total cash receipts

c. The excess of available cash over cash disbursements

d. The amount of financing required

124. Which one of the following sections would not appear on a cash budget?

a. Cash receipts

b. Financing

c. Investing

d. Cash disbursements

 

125. A company’s past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5% in the second month after the sale; the remainder is never collected. Budgeted credit sales were:

January $360,000

February 216,000

March 540,000

The cash inflow in the month of March is expected to be

a. $406,800.

b. $307,800.

c. $324,000.

d. $388,800.

126. Which one of the following items would never appear on a cash budget?

a. Office salaries expense

b. Interest expense

c. Depreciation expense

d. Travel expense

127. Correy Inc. reported the following information for 2013:

October November December

Budgeted sales $460,000 $440,000 $540,000

Budgeted purchases $240,000 $256,000 $288,000

· All sales are on credit.

· Customer amounts on account are collected 50% in the month of sale and 50% in the following month.

· Cost of goods sold is 35% of sales.

· Correy purchases and pays for merchandise 60% in the month of acquisition and 40% in the following month.

· Accounts payable is used only for inventory acquisitions.

How much cash will Correy receive during November?

a. $220,000

b. $490,000

c. $450,000

d. $440,000

 

128. Correy Company reported the following information for 2013:

October November December

Budgeted sales $460,000 $440,000 $540,000

Budgeted purchases $240,000 $256,000 $288,000

· Cost of goods sold is 35% of sales.

· Correy purchases and pays for merchandise 60% in the month of acquisition and 40% in the following month.

· Accounts payable is used only for inventory acquisitions.

How much is the budgeted balance for Accounts Payable at October 31, 2013?

a. $96,000

b. $144,000

c. $204,000

d. $102,400

129. Petal Co. reported the following information for 2013:

October November December

Budgeted sales $930,000 $870,000 $1,080,000

· All sales are on credit.

· Customer amounts on account are collected 50% in the month of sale and 50% in the following month.

How much is the November 30, 2013 budgeted Accounts Receivable?

a. $900,000

b. $540,000

c. $465,000

d. $435,000

130. Bean Manufacturing reported the following information for 2013:

October November December

Budgeted purchases $240,000 $256,000 $288,000

· Operating expenses are: Salaries, $100,000; Depreciation, $40,000; Rent, $20,000; Utilities, $28,000

· Operating expenses are paid during the month incurred.

· Accounts payable is used only for inventory acquisitions.

How much is the budgeted amount of cash to be paid for operating expenses in November?

a. $404,000

b. $148,000

c. $188,000

d. $444,000

 

131. During September, the capital expenditure budget indicates a $420,000 purchase of equipment. The ending September cash balance from operations is budgeted to be $60,000. The company wants to maintain a minimum cash balance of $30,000. What is the minimum cash loan that must be planned to be borrowed from the bank during September?

a. $330,000

b. $360,000

c. $450,000

d. $390,000

Ans: d, LO: 5, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Budget Preparation

132. Young Co. has budgeted its activity for December according to the following information:

1. Sales at $600,000, all for cash.

2. Budgeted depreciation for December is $15,000.

4. The cash balance at December 1 was $15,000.

5. Selling and administrative expenses are budgeted at $60,000 for December and are paid for in cash.

6. The planned merchandise inventory on December 31 and December 1 is $18,000.

7. The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid in cash.

How much are the budgeted cash disbursements for December?

a. $345,000

b. $510,000

c. $525,000

d. $492,000

133. Dex Industries expects to purchase $120,000 of materials in March and $140,000 of materials in April. Three-fourths of all purchases are paid for in the month of purchase, and the other one-fourth are paid for in the month following the month ofpurchase. In addition, a 2% discount is received for payments made in the month of purchase. How much will April’s cash disbursements for materials purchases be?

a. $88,200

b. $108,200

c. $132,900

d. $120,000

134. On January 1, Witt Company has a beginning cash balance of $126,000. During the year, the company expects cash disbursements of $1,020,000 and cash receipts of $870,000. If Witt requires an ending cash balance of $120,000, Witt Company must borrow

a. $96,000.

b. $120,000.

c. $144,000.

d. $276,000.

 

135. Mapleview, Inc. has the following budgeted sales: July $200,000, August $300,000, and September $250,000. 40% of the sales are for cash and 60% are on credit. For the credit sales, 50% are collected in the month of sale, and 50% the next month. The total expected cash receipts during September are

a. $280,000.

b. $265,000.

c. $262,500.

d. $250,000.

136. Burr, Inc.’s direct materials budget shows total cost of direct materials purchases for April $400,000, May $480,000 and June $560,000. Cash payments are 60% in the month of purchase and 40% in the following month. The budgeted cash payments for June are

a. $528,000.

b. $512,000.

c. $480,000.

d. $416,000.

137. Which one of the following budgets would be prepared for a manufacturer but not for a merchandiser?

a. Direct labor budget

b. Cash budget

c. Sales budget

d. Budgeted income statement

138. The formula for determining budgeted merchandise purchases is budgeted

a. production + desired ending inventory – beginning inventory.

b. sales + beginning inventory – desired ending inventory.

c. cost of goods sold + desired ending inventory – beginning inventory.

d. cost of goods sold + beginning inventory – desired ending inventory.

139. Which one of the following is a problem resulting from a service company being overstaffed?

a. Labor costs will be disproportionately low.

b. Profits will be higher because of the additional salaries.

c. Staff turnover may increase.

d. Revenue may be lost.

140. The master budget for a service enterprise

a. will have the same types of budgets as a merchandiser.

b. may include a sales budget for sales revenue.

c. will not include a budgeted income statement.

d. includes a service revenue budget based on expected client billings.

 

141. Budgeting in not-for-profit organizations

a. is not important because they are not profit-oriented.

b. usually starts with budgeting expenditures, rather than receipts.

c. is necessary only if some product is produced and sold.

d. consists entirely of budgeted contributions.

142. For a merchandiser, the starting point in the development of the master budget is the

a. cash budget.

b. sales budget.

c. selling and administrative expenses budget.

d. budgeted income statement.

143. Instead of a production budget, a merchandiser will prepare a

a. pseudo-production budget.

b. merchandise purchases budget.

c. master time sheet.

d. sales forecast.

144. Orange Co. is a manufacturer and Pineapple Company is a merchandiser. What is the difference in the budgets the two entities will prepare?

a. Orange Co. will prepare a production budget, and Pineapple Company will prepare a merchandise purchases budget.

b. Orange Co. will prepare a sales forecast, and Pineapple Company will prepare a sales budget.

c. Pineapple Company will prepare a production budget, and Orange Co. willprepare a merchandise purchases budget.

d. Both companies will prepare the same types of budgets.

145. An appropriate activity index for a college or university for budgeting faculty positions would be the

a. faculty hours worked.

b. number of administrators.

c. credit hours taught by a department.

d. number of days in the school term.

146. A critical factor in budgeting for a service firm is to

a. hire professional staff to perform the budgeting work.

b. coordinate professional staff needs with anticipated services.

c. classify all personnel as either variable or fixed.

d. budget expenditures before anticipated receipts.

 

147. The primary benefits of budgeting include all of the following except it

a. requires only top management to plan ahead and formalize theirfuture goals.

b. provides definite objectives for evaluating performance.

c. creates an early warning system for potential problems.

d. motivates personnel throughout the organization.

148. The responsibility for expressing management’s budgeting goals in financial terms is performed by the

a. accounting department.

b. top management.

c. lower level of management.

d. budget committee.

149. Coordinating the preparation of the budget is the responsibility of the

a. treasurer.

b. president.

c. chief accountant.

d. budget committee.

150. For better management acceptance, the flow of input data for budgeting should begin with the

a. accounting department.

b. top management.

c. lower levels of management.

d. budget committee.

151. In the direct materials budget, the quantity of direct materials to be purchased is computed by adding direct materials required for production to

a. desired ending direct materials.

b. beginning direct materials.

c. desired ending direct materials less beginning direct materials.

d. beginning direct materials less desired ending direct materials.

152. Grey Company has 24,000 units in beginning finished goods. If sales are expected to be 120,000 units for the year and Grey desires ending finished goods of 30,000 units, how many units must the company produce?

a. 114,000

b. 120,000

c. 126,000

d. 150,000

 

153. The important end-product of the operating budgets is the

a. budgeted income statement.

b. cash budget.

c. production budget.

d. budgeted balance sheet.

154. On January 1, Kale Company has a beginning cash balance of $42,000. During the year, the company expects cash disbursements of $340,000 and cash receipts of $290,000. If Kale requires an ending cash balance of $40,000, the company must borrow

a. $32,000.

b. $40,000.

c. $48,000.

d. $92,000.

155. The budget that is often considered to be the most importantfinancial budget is the

a. cash budget.

b. capital expenditure budget.

c. budgeted income statement.

d. budgeted balance sheet.

156. Lark Corp.’s direct materials budget shows total cost of direct materials purchases for January $250,000, February $300,000 and March $350,000. Cash payments are 60% in the month of purchase and 40% in the following month. The budgeted cash payments for March are

a. $330,000.

b. $320,000.

c. $300,000.

d. $260,000.

157. A purchases budget is used instead of a production budget by

a. merchandising companies.

b. service enterprises.

c. not-for-profit organizations.

d. manufacturing companies.

158. Which of the following statements is incorrect?

a. A continuous twelve-month budget results from dropping the month just ended and adding a future month.

b. The production budget is derived from the direct materials and direct labor budgets.

c. The cash budget shows anticipated cash flows.

d. In the budget process for not-for-profit organizations, the emphasis is on cash flow rather than on revenue and expenses.

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