Duffy Corp.has provided a part of its budget for the second quarter: \[\begin{array} { | l | r | r | r | } \hline & { \text { Apr } } &{ \text { May } } &{ \text { Jun } } \\ \hline \text { Cash collections } & \$ 40,000 & \$ 40,000 & \$ 52,000 \\ \hline \text { Cash payments: } & & & \\ \hline \text { Purchases of direct materials } & 4500 & 5000 & 7000 \\ \hline \text { Operating expenses } & 7200 & 7000 & 4500 \\ \hline \text { Capital expenditures } & 5000 & 0 & 10,000 \\ \hline \end{array}\] The cash balance on April 1 is $14,000.Assume that there will be no financing transactions or costs during the quarter.Calculate the projected cash balance at the end of April.

A) $95,800 B) $54,000 C) $37,300 D) $65,300 A) $95,800 B) $54,000 C) $37,300 D) $65,300

The following details have been extracted from the budget of a merchandising company. \[\begin{array} { | l | l | } \hline \text { Rent Expense } & \$ 8400 \text { per month } \\ \hline \text { Depreciation Expense } & \$ 3500 \text { per month } \\ \hline \text { Insurance Expense } & \$ 2000 \text { per month } \\ \hline \text { Miscellaneous Expense } & 2 \% \text { of sales, paid as incurred } \\ \hline \text { Commissions Expense } & 3 \% \text { of sales } \\ \hline \text { Salaries Expense } & \$ 6000 \text { per month } \\ \hline \end{array}\] \[\begin{array} { | c | r | r | c | } \hline \text { Dec } & \text { Jan } & { \text { Feb } } & \text { March } \\ \hline \text { Sales } \$ 55,000 & \$ 60,000 & \$ 75,000 & \$ 90,000 \\ \hline \end{array}\] Commissions and salaries expenses are paid 50% in the month to which they are incurred 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.

A) $21,100 B) $49,200 C) $70,300 D) $26,200 A) $21,100 B) $49,200 C) $70,300 D) $26,200

Galina,Inc.has prepared the following direct materials purchases budget: \[\begin{array} { | l | r | } \hline \text { Month } & { \begin{array} { l } \text { Budgeted DM } \\ \text { Purchases } \end{array} } \\ \hline \text { June } & \$ 69,000 \\ \hline \text { July } & 78,500 \\ \hline \text { August } & 78,100 \\ \hline \text { September } & 76,000 \\ \hline \text { October } & 78,200 \\ \hline \end{array}\] All purchases are paid for as follows: 40% in the month of purchase,50% in the following month,and 10% two months after purchase.Calculate the budgeted balance of accounts payable at the end of October.

A) $46,920 B) $54,520 C) $7600 D) $15,420 A) $46,920 B) $54,520 C) $7600 D) $15,420

Exam 22: Master Budgets

Thornton,Inc.has budgeted sales for the months of September and October at $303,000 and $289,000,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.

Free

(Multiple Choice)

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(80)

Question 1

Correct Answer:

Verified

C

The sales budget is considered the cornerstone of the master budget because ________.

Free

(Multiple Choice)

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Question 2

Correct Answer:

Verified

A

The budgeted multi-step income statements of both manufacturing and merchandising companies include the calculation of gross profit.

Free

(True/False)

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Question 3

Correct Answer:

Verified

True

The budgeting process ________.

(Multiple Choice)

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Question 4

The production budget determines the number of units to be produced during the period.

(True/False)

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Question 5

Duffy Corp.has provided a part of its budget for the second quarter: Apr May Jun Cash collections \ 40,000 \ 40,000 \ 52,000 Cash payments: Purchases of direct materials 4500 5000 7000 Operating expenses 7200 7000 4500 Capital expenditures 5000 0 10,000 The cash balance on April 1 is $14,000.Assume that there will be no financing transactions or costs during the quarter.Calculate the projected cash balance at the end of April.

(Multiple Choice)

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Question 6

The amount of accumulated depreciation for the budgeted balance sheet of a merchandising company can be obtained from the ________.

(Multiple Choice)

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Question 7

If the amount of indirect materials needed for production is deemed to be insignificant,it should not be included in the direct materials budget.

(True/False)

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Question 8

Which of the following is TRUE of the sales budget?

(Multiple Choice)

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Question 9

Delbert,Inc.has prepared its third quarter budget and provided the following data: Jul Aug Sep Cash collections \ 50,000 \ 39,600 \ 46,100 Cash payments: Purchases of direct materials 30,000 21,700 17,600 Operating expenses 12,300 8000 11,600 Capital expenditures 13,700 24,300 0 The cash balance on June 30 is projected to be $4100.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?

(Multiple Choice)

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Question 10

The following details have been extracted from the budget of a merchandising company. Rent Expense \ 8400 per month Depreciation Expense \ 3500 per month Insurance Expense \ 2000 per month Miscellaneous Expense 2\% of sales, paid as incurred Commissions Expense 3\% of sales Salaries Expense \ 6000 per month Dec Jan Feb March Sales \ 55,000 \ 60,000 \ 75,000 \ 90,000 Commissions and salaries expenses are paid 50% in the month to which they are incurred 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.

(Multiple Choice)

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Question 11

Cost behavior is considered in developing the selling and administrative expense budget as costs are designated as variable or fixed.

(True/False)

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Question 12

Galina,Inc.has prepared the following direct materials purchases budget: Month Budgeted DM Purchases June \ 69,000 July 78,500 August 78,100 September 76,000 October 78,200 All purchases are paid for as follows: 40% in the month of purchase,50% in the following month,and 10% two months after purchase.Calculate the budgeted balance of accounts payable at the end of October.

(Multiple Choice)

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Question 13

A manufacturing company has prepared the operating budget and the cash budget and is now preparing the budgeted balance sheet.The balance of Accounts Receivable can be obtained from the ________.

(Multiple Choice)

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Question 14

Sensitivity analysis is a what-if technique.

(True/False)

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Question 15

For a merchandising company,the final step in the process of creating the master budget is the preparation of the ________.

(Multiple Choice)

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Question 16

The cost accountant works directly with the corporate president to develop the selling and administrative expense budget.

(True/False)

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Question 17

For manufacturing companies,the primary source of cash is from its customers.

(True/False)

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Question 18

The capital expenditures budget is completed before the preparation of the cash budget.

(True/False)

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Question 19

Which of the following is an example of the coordination and communication function of the budgeting process?

(Multiple Choice)

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Question 20

Exam 22: Master Budgets

The sales budget is considered the cornerstone of the master budget because ________.

The budgeted multi-step income statements of both manufacturing and merchandising companies include the calculation of gross profit.

The budgeting process ________.

The production budget determines the number of units to be produced during the period.

The amount of accumulated depreciation for the budgeted balance sheet of a merchandising company can be obtained from the ________.

If the amount of indirect materials needed for production is deemed to be insignificant,it should not be included in the direct materials budget.

Which of the following is TRUE of the sales budget?

Cost behavior is considered in developing the selling and administrative expense budget as costs are designated as variable or fixed.

A manufacturing company has prepared the operating budget and the cash budget and is now preparing the budgeted balance sheet.The balance of Accounts Receivable can be obtained from the ________.

Sensitivity analysis is a what-if technique.

For a merchandising company,the final step in the process of creating the master budget is the preparation of the ________.

The cost accountant works directly with the corporate president to develop the selling and administrative expense budget.

For manufacturing companies,the primary source of cash is from its customers.

The capital expenditures budget is completed before the preparation of the cash budget.

Which of the following is an example of the coordination and communication function of the budgeting process?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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