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21) 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.

A) $9,000

B) $5,000

C) $3,000

D) ($8,000)

22) 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 final cash balance at the end of August taking into consideration all the financing transactions.

A) $6,958

B) $5,254

C) $7,100

D) $4,320

23) 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 amount of principal repayment at the end of September.

A) $5,000

B) $10,000

C) $15,000

D) $20,000

24) 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 final projected cash balance at the end of September.

A) $6,000

B) $5,254

C) $6,133

D) $7,200

25) 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.

A) $36,000

B) $44,000

C) $50,000

D) $54,000

26) Purchases for May were $100,000, while expected purchases for June and July are $110,000 and $125,000, respectively. All purchases are paid 25% in the month of purchase and 75% the following month. Calculate the budgeted payments for the month of June.

A) $102,500

B) $107,500

C) $110,000

D) $121,250

27) 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.

A) $168,000

B) $232,000

C) $288,000

D) $290,000

28) A company has prepared the operating budget and the cash budget and is now preparing the budgeted balance sheet. While doing so, the cash balance can be taken from ________.

A) the operational budget

B) the budgeted income statement

C) the cash budget

D) the sales budget

29) A 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 ________.

A) the inventory, purchases, and cost of goods sold budget

B) the cash receipts from customers

C) the capital expenditures budget

D) the selling and administrative expenses budget

30) A company has prepared the operating budget and the cash budget and is now preparing the budgeted balance sheet. The balance of Inventory can be taken from ________.

A) production budget and cost of goods sold budget

B) the financial budget

C) the cash budget

D) the selling and administrative expenses budget

Solution
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