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1) At the end of the current period, a company reported $475,000 in net credit sales and
$75,000 in ending accounts receivable. Calculate this company's days' sales uncollected
at the end of the current period.
2) Discuss the relation between risk and return.
3) Identify the advantages and disadvantages of bond financing.
4) A company purchased land on which to construct a new building for a cost of
$250,000. Additional costs incurred were:
What total dollar amount should be charged to Land and what amount should be
charged to the new Building?
5) Cambridge, Inc., is preparing its master budget for the quarter ended June 30. It sells
a single product for $40 each. Sales are 60% cash and 40% on credit. All credit sales are
collected in the month following the sale. At March 31, the balance in accounts
receivable is $12,000, which represents the uncollected balance on March sales.
Budgeted sales for the next four months follow:
The product cost is $20 per unit, and desired ending inventory is 60% of the following
month's sales in units. Inventory at March 31 is 480 units. Purchases are paid 50% in
the month of purchase and 50% in the following month. At March 31, the balance in
accounts payable is $11,000, which represents the unpaid purchases from March.
Operating expenses are paid in the month incurred and consist of:
Commissions (10% of sales)
Shipping (3% of sales)
Office salaries ($3,000 per month)
Rent ($5,000 per month)
Depreciation is $2,000 per month. Income taxes are 40%, and will be paid on July 1.
There are no taxes payable at March 31. A minimum cash balance of $12,000 is
required, and the beginning cash balance is $12,000. Loans are obtained at the end of
any month when a cash shortage occurs. Interest is 1% per month based on the
beginning of the month loan balance and is paid at each month end. If an excess balance
of cash exists, loans are repaid at the end of the month. At March 31, the loan balance is
$2,000. Prepare a master budget (round all dollar amounts to the nearest whole dollar)
for each of the months of April, May, and June that includes the:
Sales budget
Table of cash receipts
Merchandise purchases budget
Table of cash disbursements for purchases of merchandise
Table of cash disbursements for selling and administrative expenses
Cash budget, including information on the loan balance
Budgeted income statement
6) A company is beginning a savings plan. It will be saving $15,000 per year for the
next 10 years. How much will the company have accumulated after the tenth year-end
deposit, assuming the fund earns 10% interest?
7) A company issued 10%, 5-year bonds with a par value of $2,000,000, on January 1.
Interest is to be paid semiannually each June 30 and December 31. The bonds were sold
at $2,162,290 to yield the buyers an 8% annual return. The company uses the effective
interest method of amortization.
(1) Prepare an amortization table for the first two semiannual payment periods using the
format shown below.
(2) Prepare the journal entry to record the first semiannual interest payment.
