Exam 7: The Master Budget

Important factors considered by sales forecasters include all of the following except:

The following sales budget has been prepared: Month Cash Sales Credit Sales Septemb er \ 99,000 \ 250,000 October 225,000 180,000 November 310,000 210,000 December 94,000 170,000 Collections are 50% in the month of sale, 40% in the month following the sale, and 10% two months following the sale. No uncollectible accounts are anticipated. is the expected balance of Accounts Receivable as of November 30.

The master budget includes forecasts for all of the following except:

Carson Company has gathered the following information: April 30 endingcash balance \ 45,000 Dividends paid in May \ 12,000 Cash expenditures in May for operating expenses \ 36,800 Depreciation expense in May \ 4,500 Cash collections in May \ 89,000 Merchandise purchases paid in cash in May \ 56,200 Purchase equipment for cash in May \ 17,500 $\text { Carson Company desires to keep a minimum cash balance of } \$ 10,000 \text {. }$ Required: Prepare a cash budget for May, and indicate whether or not Carson Company meets minimum cash requirements.

The major drawback of using historical results for judging current performance is that inefficiencies may be concealed in the past performance.

Harrison Company has the following information: Month BudgetedS ales June \ 68,000 July 72,000 August 74,000 Septemb er 76,000 October 78,000 The cost of goods sold percentage is 65% and the desired ending inventory level is 25% of next month's sales. Required: Prepare a purchases budget for July through September.

The budgeting process that focuses on preparing the budgets for various functions such as production, selling, and administrative support

A common form of master budget that adds a month in the future as the month just ended is dropped

Statement of planned cash receipts and disbursements

What are the important factors that are considered by sales forecasters?

Drake Company has the following information: Month Budgeted Purchases January \ 26,800 February 29,000 March 30,520 April 29,480 May 27,680 Purchases are paid for in the following manner: 10% in the month of purchase 50% in the month after purchase 40% two months after purchase Is the total estimated cash disbursement in May from the purchase of merchandise.

"Cooking the books" refers to reporting false accounting numbers.

"I cannot be bothered with setting up my monthly budget on a spreadsheet. It just takes too long to be worth the effort." Comment.

Another term for forecasted financial statement

Leads to long- range planning but does not deal with a specific time frame nor produce forecasted financial statements

The part of the master budget that focuses on the effects that the operating budget and other plans (such as capital budgets and repayments of debt) will have on cash

The following sales budget has been prepared: Month Cash Sales Credit Sales September \ 100,000 \ 200,000 October 125,000 180,000 November 130,000 210,000 December 135,000 190,000 Collections are 50% in the month of sale, 40% in the month following the sale, and 10% two months following the sale. No uncollectible accounts are anticipated. is the estimated cash collection in November.

Depreciation expense is usually subtracted as an operating expense to calculate budgeted ending cash on hand.

Emerald Corporation has the following information: Month Budgeted Sales May \ 46,000 June 50,000 July 52,000 August 48,000 The cost of goods sold percentage is 65% and the desired inventory level is 25% of next month's sales was the beginning inventory for May.

Preparing a master budget using a spreadsheet is a quick and easy task.