63. A plan that lists dollar amounts to be received from disposing of plant assets and dollar
amounts to be spent on purchasing additional plant assets is called a:
A. Cash budget.
B. Capital expenditures budget.
C. Rolling budget.
D. Sales budget.
E. Production budget.
64. A plan that reports the units or costs of merchandise to be purchased by a merchandising
company during the budget period is called a:
A. Selling expenses budget.
B. Merchandise purchases budget.
C. Sales budget.
D. Cash budget.
E. Capital expenditures budget.
65. A plan showing the planned sales units and the revenue to be derived from these sales, and
is the usual starting point in the budgeting process, is called the:
A. Operating budget.
B. Business plan.
C. Income statement budget.
D. Merchandise purchases budget.
E. Sales budget.
66. A plan that lists the types and amounts of selling expenses expected during the budget
period is called a(n):
A. Sales budget.
B. Operating budget.
C. Capital expenditures budget.
D. Selling expense budget.
E. Purchases budget.
67. Which of the following factors is least likely to be considered in preparing a sales
budget?
A. Plant capacity.
B. General economic and industry conditions.
C. Past sales volume.
D. The capital expenditures budget.
E. Proposed selling expenses, such as advertising.
68. A department store has budgeted sales of 12,000 men’s suits in September. Management
wants to have 6,000 suits in inventory at the end of the month to prepare for the winter
season. Beginning inventory for September is expected to be 4,000 suits. What is the dollar
amount of the purchase of suits? Each suit has a cost of $75.
A. $ 750,000.
B. $ 900,000.
C. $1,050,000.
D. $1,200,000.
E. $1,350,000.
69. 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?
A. $ 5,000.
B. $ 7,000.
C. $ 8,000.
D. $ 9,000.
E. $10,000.
70. Ecology Co. sells a biodegradable product called Dissol and has predicted the following
sales for the first four months of the current year:
Jan. Feb. March April
Sales in Units ……….. 1,700 1,900 2,100 1,600
Ending inventory for each month should be 20% of the next month’s sales, and the December
31 inventory is consistent with that policy. How many units should be purchased in
February?
A. 1,860.
B. 1,900.
C. 1,940.
D. 1,980
E. 2,320.
71. Fairway’s April sales forecast projects that 6,000 units will sell at a price of $10.50 per
unit. The desired ending inventory is 30% higher than the beginning inventory, which was
1,000 units. Budgeted purchases of units in April would be:
A. 6,000 units.
B. 7,000 units.
C. 6,300 units.
D. 7,300 units.
E. Some other amount.
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72. 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. Total budgeted sales of both products for the year would be:
A. $ 42,000.
B. $200,000.
C. $264,000.
D. $464,000.
E. $500,000.
73. 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 A for the year would be:
A. 22,400 units.
B. 20,400 units.
C. 20,000 units.
D. 19,500 units.
E. 12,200 units.
74. 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:
A. 24,500 units.
B. 22,500 units.
C. 16,500 units.
D. 26,500 units.
E. 20,500 units.
75. A quantity of merchandise or materials over the minimum needed that reduces the risk of
running short is called:
A. Just-in-time inventory.
B. Budgeted stock.
C. Continuous inventory.
D. Capital stock.
E. Safety stock.
76. Stritch Company is trying to decide how many units of merchandise to order each month.
The company’s policy is to have 20% of the next month’s sales in inventory at the end of each
month. Projected sales for August, September, and October are 30,000 units, 20,000 units,
and 40,000 units, respectively. How many units must be purchased in September?
A. 14,000.
B. 20,000.
C. 22,000.
D. 24,000.
E. 28,000.
77. If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and
budgeted cost of goods sold is $10,260, budgeted purchases should be:
A. $ 860
B. $ 1,100
C. $ 1,960
D. $ 9,160
E. $11,360
78. Barrett’s Fashions forecasts sales of $125,000 for the quarter ended December 31. Its
gross profit rate is 20% of sales, and its September 30 inventory is $32,500. If the December
31 inventory is targeted at $41,500, budgeted purchases for the fourth quarter should be:
A. $134,000.
B. $109,000.
C. $ 91,500.
D. $ 25,000.
E. $ 91,000.
79. When preparing the cash budget, all the following should be considered except:
A. Cash receipts from customers.
B. Cash payments for merchandise.
C. Depreciation expense.
D. Cash payments for income taxes.
E. Cash payments for capital expenditures.
80. A plan that shows the expected cash inflows and cash outflows during the budget period,
including receipts from loans needed to maintain a minimum cash balance and repayments of
such loans, is called a(n):
A. Capital expenditures budget.
B. Operating budget.
C. Rolling budget.
D. Cash budget.
E. Income statement.
81. Which of the following accounts would appear on a budgeted balance sheet?
A. Income tax expense.
B. Accounts receivable.
C. Sales commissions.
D. Depreciation expense.
E. All of the choices are correct.
82. Which of the following budgets must be completed before a cash budget can be prepared?
A. Capital expenditures budget.
B. Sales budget.
C. Merchandise purchases budget.
D. General and administrative expense budget.
E. All of these budgets must be completed before the cash budget.
83. Which of the following would not be used in preparing a cash budget for October?
A. Beginning cash balance on October 1.
B. Budgeted sales and collections for October.
C. Estimated depreciation expense for October.
D. Budgeted salaries expense for October.
E. Budgeted capital equipment purchases for October.
84. Northern Company is preparing a cash budget for June. The company has $12,000 cash at
the beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash
disbursements during June. Northern Company has an agreement with its bank to maintain a
cash balance of at least $10,000. As of May 31, the company owes $15,000 to the bank. To
maintain the $10,000 required balance, during June the company must:
A. Borrow $4,500.
B. Borrow $2,500.
C. Borrow $10,000.
D. Repay $7,500.
E. Repay $2,500.
85. A managerial accounting report that presents predicted amounts of the company’s assets,
liabilities, and equity as of the end of the budget period is called a(n):
A. Rolling balance sheet.
B. Continuous balance sheet.
C. Budgeted balance sheet.
D. Cash balance sheet.
E. Operating balance sheet.
86. Julia’s Candy Co. reports the following information from its sales account and sales
budget:
Sales May…………………… $105,000
June…………………… 93,000
Expected Sales: July…………………….. $90,000
August…………………. 110,000
September……………… 120,000
Cash sales are normally 25% of total sales and all credit sales are expected to be collected in
the month following the date of sale. The total amount of cash expected to be received from
customers in September is:
A. $ 30,000.
B. $ 82,500.
C. $112,500.
D. $120,000.
E. $202,500.
87. A managerial accounting report that presents predicted amounts of the company’s
revenues and expenses for the budget period is called a:
A. Budgeted income statement.
B. Budgeted balance sheet.
C. Master plan.
D. Rolling income statement.
E. Continuous income statement.
88. 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?
A. $19,700.
B. $28,500.
C. $30,000.
D. $31,100.
E. $33,900.
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89. In preparing a budgeted balance sheet, the amount for Accounts Receivable is primarily
determined from:
A. The purchases budget.
B. The sales budget.
C. The capital expenditures budget.
D. The budgeted income statement.
E. The selling expenses budget.
90. Long-term liability data for the budgeted balance sheet is derived from:
A. The cash budget and capital expenditures budget.
B. The cash budget and sales budget.
C. The cash budget and budgeted income statement.
D. The sales budget and production budget.
E. The asset budget and debt budget.
91. In preparing financial budgets:
A. The budgeted balance sheet is usually prepared last.
B. The cash budget is usually not prepared.
C. The budgeted income statement is usually not prepared.
D. The capital expenditures budget is usually prepared last.
E. The merchandise purchases budget is the key budget.
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92. 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:
A. $57,000
B. $61,200
C. $66,400
D. $80,750
E. $90,250
93. A company’s history indicates that 20% of its sales are for cash and the rest are on credit.
Collections on credit sales are 30% in the month of the sale, 50% in the next month, and 15%
the following month. Projected sales for January, February, and March are $60,000, $85,000
and $95,000, respectively. The March expected cash receipts from all current and prior credit
sales is:
A. $57,000
B. $63,080
C. $64,000
D. $80,750
E. $90,250
94. Harold’s expects its September sales to be 20% higher than its August sales of $150,000.
Purchases were $100,000 in August and are expected to be $120,000 in September. All sales
are on credit and are collected as follows: 30% in the month of the sale and 70% in the
following month. Merchandise purchases are paid as follows: 25% in the month of purchase
and 75% in the following month. The beginning cash balance on September 1 is $7,500. The
ending cash balance on September 30 would be:
A. $31,500.
B. $67,500.
C. $54,000.
D. $61,500.
E. $136,500.
95. 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?
A. $29,160.
B. $46,760.
C. $61,160.
D. $66,200.
E. $78,800.
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96. Berkley Co.’s sales are 10% cash and 90% on credit. Credit sales are collected as follows:
30% in the month of sale, 50% in the next month, and 20% in the following month. On
December 31, the accounts receivable balance includes $12,000 from November sales and
$42,000 from December sales. Assume that total sales for January are budgeted to be
$50,000. What are the expected cash receipts for January from the current and past sales?
A. $18,500.
B. $51,500.
C. $51,900.
D. $55,500.
E. $60,500.
97. Berkley Co.’s sales are 10% for cash and 90% on credit. Credit sales are collected as
follows: 30% in the month of sale, 50% in the next month, and 20% in the following month.
On December 31, the accounts receivable balance includes $12,000 from November sales and
$42,000 from December sales. Assume that total sales for January and February are budgeted
to be $50,000 and $100,000, respectively. What are the expected cash receipts for February
from current and past sales?
A. $80,500.
B. $71,500.
C. $34,500.
D. $61,500.
E. $59,500.
98. A plan that shows the predicted costs for direct materials, direct labor, and overhead to be
incurred in manufacturing the units in the production budget is called the:
A. Sales budget.
B. Merchandise purchases budget.
C. Production budget.
D. Rolling budget.
E. Manufacturing budget.
99. To determine the production budget for an accounting period, consideration is given to all
of the following except:
A. Budgeted ending inventory.
B. Budgeted beginning inventory.
C. Budgeted sales.
D. Budgeted overhead.
E. Ratio of inventory to future sales.
100. Which of the following budgets is part of the manufacturing budget?
A. Sales budget.
B. Direct materials budget.
C. Production budget.
D. Merchandise purchases budget.
E. Cash budget.
101. A plan that states the number of units to be manufactured during each future period
covered by the budget, based on the budgeted sales for the period and the levels of inventory
needed to support future sales, is the:
A. Sales budget.
B. Merchandise purchases budget.
C. Production budget.
D. Cash budget.
E. Manufacturing budget.
102. Kyoto, Inc. predicts the following sales in units for the coming four months:
April May June June
Sales in Units ……….. 240 280 300 240
Although each month’s ending inventory of finished units should be 60% of the next month’s
sales, the March 31 finished goods inventory is only 100 units. A finished unit requires five
pounds of raw material B. The March 31 raw materials inventory has 200 pounds of B. Each
month’s ending inventory of raw materials should be 30% of the following month’s production
needs. The budgeted production for May is:
A. 200 units.
B. 212 units.
C. 268 units.
D. 280 units.
E. 292 units.
103. Kyoto, Inc. predicts the following sales in units for the coming four months: