ACCT Class 10 Vid & Quiz

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10 Terms

1
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Strategic planning focuses on

long-range decisions.

2
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Pro forma statements are based on

estimates and predictions.

3
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Which of the following describes the normal sequence followed in preparing a master budget?

Sales budget → Inventory purchases budget → Selling and administrative expense budget → Cash budget

4
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Since a company must know how much inventory is on hand before it can determine how many items must be purchased, the inventory purchases budget is normally the starting point in the process of preparing a master budget. This statement is

false.

The sales budget is normally the starting point in the development of the master budget. A company must know how many units it will sell before knowing how many units must be purchased.

5
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Star Company projected unit credit sales for the last four months of the year as shown below:

September 3,000

October 3,200

November 4,100

December 5,600

The company's past records show collection of credit sales as 60% in the month of sale and the balance in the following month. If inventory units are sold for $25, the total cash collections on receivables in November will be

$93,500.

October

3,200 units × .4 = 1,280 units

November

4,100 units × .6 = 2,460 units

Total

3,740 units × $ 25 = $ 93,500

6
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The general, selling and administrative expense budget is normally prepared

before the cash budget.

7
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Which of the following items would not appear in a selling and administrative expense budget?

Cost of goods sold.

Cost of goods sold is a product cost that is included in the inventory purchases budget.

8
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Overhead expenses are budgeted at $2,000 per month. Included in the $2,000 are $500 of monthly depreciation expense and $200 of allocated expenses related to the insurance premium that is paid in September. What is the cash outflow for overhead for the month of May?

$1,300

Total Overhead Expense

$ 2,000

Less: Depreciation

(500 ) Noncash expense

Less: Insurance

(200 ) Noncash expense

Cash Outflow

$ 1,300

9
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The following information is drawn from Royal Industries' cash budget:

Cash Receipts

$ 40,000

Beginning Cash Balance

$ 10,000

Cash Payments

$ 48,000

Desired Ending Cash Cushion

$ 5,000

If there is a cash shortage, the company borrows money. If a surplus occurs funds are used to repay loans or to invest in short-term assets. The company had no debt before January 1st. The amounted "needed" to borrow or the amount "available" for repayment of debt in January would be

$3,000 needed.

The expected ending cash balance is computed as follows:

Beg. Cash Balance $ 10,000

Cash Receipts 40,000

Cash Available 50,000

Cash Payments 48,000

Expected Ending Cash Balance $ 2,000

To achieve the desired ending balance of $5,000 the Company needs to borrow $3,000.

10
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Information need to prepare the cash budget is drawn from which of the following budgets?

All of the answers describe budgets that contain information need to prepare the cash budget.