How to calculate preliminary cash balance

Question 1

1. The following details have been extracted from the budget of a merchandising company. Rent Expense $8,000 per month Depreciation Expense $ 3,500 per month Insurance Expense $1,250 per month Miscellaneous Expense 2% of sales, paid as incurred Commissions Expense 10% of sales Salaries Expense $7,000 per month Dec Jan Feb March Sales $45,000 $50,000 $65,000 $80,000 Commission and salaries expenses are paid 50% in the month to which they relate and the balance in the next month. Rent and miscellaneous expenses are paid as and when they occur. Insurance is prepaid at the beginning of the quarter. Calculate cash payments for the selling and administrative expenses for the first quarter of the next year.

$50,500

$75,000

$70,400

$62,750

1 points

Question 2

1. Which of the following best describes the term sensitivity analysis?

It evaluates a company's financial condition by doing financial statement analysis.

It is a testing technique to determine how results would differ if key assumptions are changed.

It is an evaluation of the accuracy of the assumptions.

It is an analysis of the emotional sensitivity of a company's employees.

1 points

Question 3

1. Diemans Corp .has provided a part of its budget for the second quarter: Apr May June Cash collections $40,000 $45,000 $52,000 Cash payments: Purchases of inventory 4,500 7,200 4,500 Operating expenses 7,900 5,600 9,000 Capital expenditures 0 20,000 4,600 The cash balance on April 1 is $12,000. Assume that there will be no financing transactions or costs during the quarter. Calculate the cash balance at the end of June.

$40,800

$85,700

$21,800

$26,500

1 points

Question 4

1. Which of the following is true of the sales budget?

It captures the variable and fixed expenses of the business.

It is used in the production budget.

It shows the value of expected production in a period.

It provides sales values that are used to prepare financial statements for external reporting purposes.

1 points

Question 5

1. Which of the following describes the production budget?

It gives the quantity of finished goods to be manufactured during a budget period.

It depicts the breakdown of sales on the basis of terms and conditions of collection of sales revenue.

It helps in planning to ensure the business has adequate cash.

It aids in planning to ensure the company has adequate inventory and cash on hand.

1 points

Question 6

1. Châtelain Company is preparing its budget for the third quarter. Cash balance on July 31 was $30,000. Assume there is no minimum balance of cash required and no borrowing is undertaken. Additional budgeted data is provided here: Jul Aug Sep Cash collections $50,000 $51,000 $52,000 Cash payments: Purchases of inventory 20,000 19,000 18,000 Operating expenses 25,000 21,000 32,000 Capital expenditures 5,000 9,000 16,000 Calculate the balance of cash at the end of August.

$29,050

$32,000

$28,800

$19,100

1 points

Question 7

1. Gamma Corp. has prepared a preliminary cash budget for the third quarter as shown below: Cash Budget Jul Aug Sep Beginning cash balance $32,000 $4,400 $6,900 Plus: Cash collections 49,400 51,000 44,600 Cash available $81,400 $55,400 $51,500 Less: Cash payments: Purchases of inventory 36,000 9,000 11,000 Operating expenses 41,000 30,500 30,900 Capital expenditures 0 9,000 7,700 Ending cash balance $4,400 $6,900 $1,900 Subsequently, the marketing department revised its figures for cash collections. New data are as follows: $52,000 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 September.

$7,000

$2,400

$8,500

$900

1 points

Question 8

1. Acme Inc. has prepared its third quarter budget and provided the following data: Jul Aug Sep Cash collections $50,000 $40,000 $48,000 Cash payments: Purchases of inventory 31,000 22,000 18,000 Operating expenses 12,000 9,000 11,600 Capital expenditures 13,000 25,000 0 The cash balance on June 30 is projected to be $4,000. 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 ending cash balance before financing for August.

($8,000)

$5,000

$9,000

$3,000

1 points

Question 9

1. Which of the following describes the selling and administrative expenses budget?

It captures the variable and fixed components of selling and administrative expenses of the business.

It depicts the breakdown of sales based on terms of collection.

It shows the cash flows related to the selling and administrative expenses and helps in planning to ensure the business has adequate cash.

It aids in planning to ensure the company has adequate inventory on hand.

1 points

Question 10

1. The cash budget and the budgeted financial statements are collectively known as the ________.

financial budget

master budget

operating budget

production budget

1 points

Question 11

1. Uncle's Caps Inc. a merchandising company has provided the following budgeted amounts for the next budget period. Balance of cash at the beginning $30,000 Cash collections 680,000 Payments for: Purchase of inventory 350,000 Selling and administrative expenses 70,400 Capital expenditures 89,000 A minimum cash balance of $250,000 is required to be maintained. The company can borrow in increments of $10,000 as and when required. Assume the company can borrow the needed funds at the end of the period. Calculate the ending cash balance for the budget period.

$250,600

$540,230

$300,000

$320,300

1 points

Question 12

1. Farmerlands Inc. has budgeted sales for the months of September and October at $300,000 and $280,000, 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.

$168,000

$288,000

$232,000

$290,000

1 points

Question 13

1. Freighters Inc. has the following budgeted figures: Calculate the ending merchandise inventory for the month of March.

$33,750

$52,000

$39,000

$38,750

1 points

Question 14

1. Kapital Inc. has prepared the operating budget for the first quarter of 2015. They forecast sales of $50,000 in January, $60,000 in February, and $70,000 in March. Variable and fixed expenses are as follows: Variable: Power cost (40% of Sales) Miscellaneous expenses: (5% of Sales) Fixed: Salary expense: $8,000 per month Rent expense: $5,000 per month Depreciation expense: $1,200 per month Power cost/fixed portion: $800 per month Miscellaneous expenses/fixed portion: $1,000 per month Using the information above, calculate the amount of selling and administrative expenses for the month of February.

$47,500

$41,700

$43,000

$38,500

1 points

Question 15

1. Nobula Corp. is preparing their budget for the second quarter and provides the following data: Apr May Jun Budgeted purchases $20,000 $24,000 $18,000 Budgeted Cash Payments for Inventory Purchases Apr May Jun 60% of previous month purchases $6,000 $12,000 $14,400 40% of current month purchases 8,000 9,600 7,200 Total cash payments $14,000 $21,600 $21,600 Assume that accounts payable pertains only to suppliers of inventory. Based on the above data, the amount of Accounts Payable that should be shown in the budgeted balance sheet as on June 30 is ________.

$3,600

$10,800

$5,400

$12,000

1 points

Question 16

1. Fulkron Inc. provides the following data taken from its third quarter budget: Jul Aug Sep Cash collections $66,000 $42,000 $45,000 Cash payments: Purchases of inventory 50,000 48,000 25,000 Operating expenses 10,000 15,000 20,000 Capital expenditures 0 32,000 6,000 The cash balance on June 30 is projected to be $10,000. Based on the above data, calculate the shortfall the company is projected to have at the end of September.

$43,000

$28,000

$40,000

$35,000

1 points

Question 17

1. Acme Inc. has prepared its third quarter budget and provided the following data: Jul Aug Sep Cash collections $50,000 $40,000 $48,000 Cash payments: Purchases of inventory 31,000 22,000 18,000 Operating expenses 12,000 9,000 11,600 Capital expenditures 13,000 25,000 0 The cash balance on June 30 is projected to be $4,000. 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?

$5,000

$15,000

$0

$10,000

1 points

Question 18

1. June sales were $40,000 while projected sales for July and August were $50,000 and $60,000, respectively. Sales are 40% cash and 60% credit. All credit sales are collected in the month following the sale. Calculate expected collections for July.

$36,000

$54,000

$44,000

$50,000

1 points

Question 19

1. McLeod Fries Inc. has budgeted sales for June and July at $680,000 and $720,000, respectively. Sales are 80% credit, of which 70% is collected in the month of sale and 30% is collected in the following month. What is the budgeted accounts receivable balance on July 31?

$ 225,320

$ 158,200

$ 200,500

$ 172,800

1 points

Question 20

1. Gamma Corp. is preparing its budget for the first quarter of 2015. The following data is provided: Inventory, Purchases and COGS Budget Jan Feb Mar Cost of goods sold (a) $30,000 $28,500 $22,500 Desired ending inventory(b) 10,700 9,500 9,800 Total inventory required 40,700 38,000 32,300 less Beginning inventory -11,000 -10,700 -9,500 Purchases 29,700 27,300 22,800 (a) COGS = 75% of sales (b) $5,000 + 20% of COGS for next month The amount of Merchandise Inventory to be shown on the budgeted balance sheet at March 31 would be ________.

$9,500

$8,750

$10,700

$9,800