Multiple Choice Answers

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

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?
$19,700.
$30,000.
$28,500.
$33,900.
$31,100.

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

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:
$67,500.
$74,250.
$60,000.
$61,250.
$63,000.

The most useful budget figures are developed:
By the CEO.
From the “top-down”.
From the “bottom-up” following a participatory process.
Solely by the budget committee.
After the accounting period has begun.

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

A formal statement of future plans, usually expressed in monetary terms, is a:
Budget.
Variance analysis.
Prospectus.
Position statement.
Variance report.

Grafton is preparing a cash budget for June. The company has $25,000 cash at the beginning of June and anticipates $95,000 in cash receipts and $111,290 in cash disbursements during June. Compute the amount the company must borrow, if any, to maintain a $20,000 cash balance. The company has no loans outstanding on June
$11,290
$28,710.
$12,290.
$6,290.
$16,290.

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

Financial budgets include all the following except the:
Sales budget.
Budgeted balance sheet.
Budgeted income statement.
Cash budget.
All of these are financial budgets.

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

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?
$5,000.
$9,000.
$10,000.
$7,000.
$8,000.

Kent Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from total sales for May.
$561,500.
$817,500.
$890,000.
$652,500.
$592,500.

Which of the following accounts would appear on a budgeted balance sheet?
Income tax expense.
Accounts receivable.
Sales commissions.
Depreciation expense.
All of these.

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

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:
24,500 units.
26,500 units.
22,500 units.
16,500 units.
20,500 units.

For budgets to be effective:
Goals should be attainable.
Employees affected by a budget should be consulted when it is prepared.
Evaluations should be made carefully with opportunities to explain any failures.
They should be properly applied to avoid negative effects.
All of these.

The Palos Company expects sales for June, July, and August of $48,000, $54,000, and $44,000, respectively. Experience suggests that 40% of sales are for cash and 60% are on credit. The company collects 50% of its credit sales in the month following sale, 45% in the second month following sale, and 5% are not collected. What are the company’s expected cash receipts for August from its current and past sales?
$61,160.
$78,800.
$46,760.
$66,200.
$29,160.

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:
$61,200
$80,750
$90,250
$66,400
$57,000