CMA_P1_CashBudget_ICMA_Target_LearnDash_wpProQuiz

CMA 0408 2-072 Prudent Corporation’s budget for the upcoming accounting period reveals total sales of $700,000 in April and $750,000 in May. The sales cash collection pattern is 20% of each month’s sales are cash sales. 5% of a month’s credit sales are uncollectible. 70% of a month’s credit sales are collected in the month of sale. 25% of a month’s credit sales are collected in the month following the sale. If Prudent anticipates the cash sale of a piece of old equipment in May for $25,000, May’s total budgeted cash receipts would be

Health Foods Inc. has decided to start a cash budgeting program to improve overall cash management. Information gathered from the past year reveals the following cash collection trends. 40% of sales are on credit 50% of credit sales are collected in month of sale 30% of credit sales are collected first month after sale 15% of credit sales are collected second month after sale 5% of credit sales result in bad debts Gross sales for the last five months were as follows. January $220,000 February 240,000 March 250,000 April 230,000 May 260,000 Sales for June are projected to be $255,000. Based on this information, the expected cash receipts for March would be

36. Historically, Fargo Freight Co. has had no significant bad debt experience with its customers. Cash sales have accounted for 10% of total sales and payments for credit sales have been received as follows. 40% of credit sales in the month of the sale. 30% of credit sales in the first subsequent month. 25% of credit sales in the second subsequent month. 5% of credit sales in the third subsequent month. The forecast for both cash and credit sales is as follows. Month Sales January $95,000 February 65,000 March 70,000 April 80,000 May 85,000 What is the forecasted cash inflow for Fargo Freight for the month of May?

CMA 696 3-9 Trumbull Company budgeted sales on account of $120,000 for July, $211,000 for August, and $198,000 for September. Collection experience indicates that 60% of the budgeted sales will be collected the month after the sale, 36% will be collected the second month, and 4% will be uncollectible. The cash receipts from accounts receivable that should be budgeted for September would be

CMA 0408 2-077 Data regarding Johnsen, Inc. ‘s forecast dollar sales for the last 7 months of the year and Johnsen’s projected collection patterns are as follows: F orecasted sales June $700,000 July 600,000 August 650,000 September 800,000 October 850,000 November 900,000 December 840,000 T.Y£eS of sales Cash sales 30% Credit sales 70% Collection pattern on credit sales (5% determined to be uncollectible) During the month of sale 20% During the first month following the sale 50% During the second month following the sale 25% Johnsen’s budgeted cash receipts from sales and collections on account for September are

32. Taylor Incorporated prepares cash budgets each month, including a forecast of monthly cash collections. Collections are expected to be 65% in the month of sale, 25% in the first month following the sale, and 10% in the second month following the sale. Sales for the first six months of the year were as follows. January $185,000 April $208,000 February $196,000 May $210,000 March $216,000 June $232,000 The total cash collected during the month of May is

CMA 696 3-8 The cash budget must be prepared before completing the

I Study Unit 14: Budgeting — Calculations and Pro Forma Financial Statements Subunit 6: Pro Forma Financial Statements 26) In general, which of the following proforma financial statements is prepared first?

CMA 1292 3-10 Proforma financial statements are part of the budgeting process. Normally, the last pro fo rma statement prepared is the

CMA 0408 2-063 The controller of Nottingham Stores has asked a staff accountant to prepare detailed reports that summarize the firm’s cash flows for the upcoming accounting period and cash position at the end of the period. Accordingly, the controller has requested preparation of a cash budget, a pro-forma statement of cash flows, a detailed listing of cash collections from customers, and a detailed listing of cash payments for merchandise purchases. Which one of the following correctly identifies the first and last document to be prepared by the accountant? First Document Last Document

84. CSO: JB5b LOS: JB5t Myers Company uses a calendar-year and prepares a cash budget for each month of the year. Which one of the following items should be considered when developing July’s cash budget?

CMA 691 3-4 DeBerg Company has developed the following sales projections for the calendar year. May $100,000 June 120,000 July 140,000 August 160,000 September 150,000 October 130,000 Normal cash collection experience has been that 50% of sales are collected during the month of sale and 45% in the month following sale. The remaining 5% of sales is never collected. DeBerg’s budgeted cash collections for the third calendar quarter are

[Fact Pattern #1] Historically, Pine Hill Wood Products has had The forecast for both cash and credit sales no significant bad debt experience with its is as follows: customers. Cash sales have accounted for 10% of total sales, and payments for credit sales Month Sales have been received as follows: January $95,000 40% of credit sales in the month of the sale February 65,000 30% of credit sales in the first subsequent March 70,000 month April 80,000 25% of credit sales in the second subsequent May 85,000 month 5% of credit sales in the third subsequent month [7] Gleim#: 6.8.144 — Source: CMA 697 3-18 (Refers to Fact Pattern #1) What is the fo recasted cash inflow for Pine Hill Wood Products for May?

[Fact Pattern #2] Birch Corporation has the following historical pattern on its credit sales: • 70% collected in month of sale • 15% collected in the first month after sale • 10% collected in the second month after sale • 4% collected in the third month after sale • 1 % uncollectible The sales on open account have been budgeted for the first 6 months of the year as follows: January $ 70,000 February 90,000 March 100,000 April 120,000 May 100,000 June 90,000 [9] Gleim #: 6.8.146 — Source: CMA 1289 4-24 (Refers to Fact Pattern #2) Birch’s estimated total cash collections during April from accounts receivable are

[Fact Pattern #2] Birch Corporation has the following historical pattern on its credit sales: • 70% collected in month of sale • 15% collected in the first month after sale • 10% collected in the second month after sale • 4% collected in the third month after sale • 1 % uncollectible The sales on open account have been budgeted for the first 6 months of the year as follows: January $ 70,000 February 90,000 March 100,000 April 120,000 May 100,000 June 90,000 [10] Gleim#: 6.8.147 — Source: CMA 1289 4-25 (Refers to Fact Pattern #2) Birch’s estimated total cash collections during the second calendar quarter from sales made on open account during the second calendar quarter are

[Fact Pattern #5] Esplanade Company has the following historical pattern for its credit sales: • 70% collected in month of sale • 15% collected in the first month after sale • 10% collected in the second month after sale • 4% collected in the third month after sale • 1 % uncollectible The sales on open account have been budgeted for the last 6 months of the year as shown below: July $ 60,000 August 70,000 September 80,000 October 90,000 November 100,000 December 85,000 [21] Gleim#: 6.8.158 — Source: CMA 692 3-27 (Refers to Fact Pattern #5) Esplanade’s estimated total cash collections during October from accounts receivable are

[Fact Pattern #5] Esplanade Company has the following historical pattern for its credit sales: • 70% collected in month of sale • 15% collected in the first month after sale • 10% collected in the second month after sale • 4% collected in the third month after sale • 1 % uncollectible The sales on open account have been budgeted for the last 6 months of the year as shown below: July $ 60,000 August 70,000 September 80,000 October 90,000 November 100,000 December 85,000 [22) Gleim #: 6.8.159 — Source: CMA 692 3-28 (Refers to Fact Pattern #5) Esplanade’s estimated total cash collections during the fourth calendar quarter from sales made on open account during the fourth calendar quarter are ~¥ ~~\

Source: CMA 0408 2-069 89. CSO: JB5b LOS: JB5u Tip-Top Cleaning Supply carries a large number of different items in its inventory, giving the firm a competitive advantage in its industry. Below is part of Tip-Top’s budget for the first quarter of next year. Sales $855,000 Cost of goods sold 425,000 Rent and salary expenses 375,000 Historically, all of the sales are on account and are made evenly over the quarter. 5% of all sales are determined to be uncollectible and written off. The balance of the receivables is collected in 50 days. This sales and collection experience is expected to continue in the first quarter. The projected balance sheet for the first day of the quarter includes the following account balances. Cash $ 10,000 Accounts receivable (net) 450,000 Inventory 900,000 Accounts payable 800,000 How much cash can Tip-Top anticipate collecting in the first quarter (based on a 360-day year)?

Gleim#: 6.8.163 — Source: CMA 0408 2-062 83. CSO: lBSb LOS: lBSu Granite Company sells products exclusively on account, and has experienced the following collection pattern: 60% in the month of sale, 25% in the month after sale, and 15% in the second month after sale. Allowance for credit losses accounts are negligible. Customers who pay in the month of sale are given a 2% discount. If sales are $220,000 in January, $200,000 in February, $280,000 in March, and $260,000 in April, Granite’s accounts receivable balance on May 1 will be

CMA 0408 2-067 87. CSO: JB5b LOS: JB5u Bootstrap Corporation anticipates the following sales during the last 6 months of the year: July $460,000 August 500,000 September 525,000 October 500,000 November 480,000 December 450,000 20% of Bootstrap’s sales are for cash. The balance is subject to the collection pattern shown below. Percentage of balance collected in the month of sale 40% Percentage of balance collected in the month following sale 30% Percentage of balance collected in the second month following sale 25% Percentage of balance uncollectible 5% What is the planned net accounts receivable balance as of December 31?

I Study Unit 14: Budgeting — Calculations and Pro Forma Financial Statements Subunit 6: Pro Forma Financial Statements 40. Warner Company is creating its proforma balance sheet for next year. Warner anticipates that 50% of sales will be collected during the month of sale, 40% will be collected in the month following the sale, and 10% will be collected two months after the sale. If Warner’s budgeted sales for the months of October, November, and December of the upcoming year are $200,000, $350,000, and $450,000, respectively, Warner’s budgeted year-end accounts receivable balance is

CMA 0408 2-065 Brown Company estimates that monthly sales will be as follows: January $100,000 February 150,000 March 180,000 Historical trends indicate that 40% of sales are collected during the month of sale, 50% are collected in the month following the sale, and 10% are collected two months after the sale. Brown’s accounts receivable balance as of December 31 totals $80,000 ($72,000 from December’s sales and $8,000 from November’s sales). The amount of cash Brown can expect to collect during the month of January is

Source: CMA 0408 2-073 92. CSO: JB5b LOS: JB5u ANNCO sells products on account, and experiences the following collection schedule. In the month of sale 10% In the month after sale 60% In the second month after sale 30% At December 31, ANN CO reports accounts receivable of $211,500. Of that amount, $162,000 is due from December sales, and $49,500 from November sales. ANNCO is budgeting $170,000 of sales for January. If so, what amount of cash should be collected in January?

19. OneCo had sales during the first three months of operations as follows. January February March Cash Sales $100,000 $110,000 $120,000 Sales on account 320,000 335,000 364,000 Total sales $420,000 $445,000 $484,000 OneCo finds that it collects cash from credit customers as follows: Within the first ten days after the month of sale, at a 2% early pay discount 60% In the month after sale, after the discount period 30% In the second month after sale 10% What will be OneCo’s cash receipts for the month of March?

CMA 0408 2-068 CSO: JB5b LOS: JB5u Projected monthly sales ofWallstead Corporation for January, February, March, and April are as follows: January $300,000 February 340,000 March 370,000 April 390,000 • The company bills each month’s sales on the last day of the month. • Receivables are booked gross and credit terms of sale are 2/10, n/30. • 50% of the billings are collected within the discount period, 30% are collected by the end of the month, 15% are collected by the end of the second month, and 5% become uncollectible. Budgeted cash collections for W allstead Company during April would be

13. Which one of the following best describes the capital budget?

11. A company is in the process of identifying, evaluating, and selecting projects that require a large commitment of funds and will generate benefits well into the future. The company will look at the budget over the life of the projects and review many different options. This is an example of