12) Mercer, Inc. had the following sales for the past six months. Mercer collects its credit sales
30% in the month of sale, 60% one month after the sale, and 10% two months after the sale.
Cash Sales Credit Sales
January $50,000 $50,000
February $70,000 $110,000
March $55,000 $95,000
April $78,000 $130,000
May $80,000 $105,000
June $75,000 $148,000
What are Mercer’s total cash receipts for the month of March?
A) $99,500
B) $119,000
C) $150,000
D) $154,500
13) Mercer, Inc. had the following sales for the past six months. Mercer collects its credit sales
30% in the month of sale, 60% one month after the sale, and 10% two months after the sale.
Cash Sales Credit Sales
January $50,000 $50,000
February $70,000 $110,000
March $55,000 $95,000
April $78,000 $130,000
May $80,000 $105,000
June $75,000 $148,000
What are Mercer’s total cash receipts for the month of April?
A) $208,000
B) $176,000
C) $168,000
D) $98,000
14) Mercer, Inc. had the following sales for the past six months. Mercer collects its credit sales
30% in the month of sale, 60% one month after the sale, and 10% two months after the sale.
Cash Sales Credit Sales
January $50,000 $50,000
February $70,000 $110,000
March $55,000 $95,000
April $78,000 $130,000
May $80,000 $105,000
June $75,000 $148,000
What are Mercer’s total cash receipts for the month of May?
A) $185,000
B) $199,000
C) $119,000
D) $176,000
15) Mercer, Inc. had the following sales for the past six months. Mercer collects its credit sales
30% in the month of sale, 60% one month after the sale, and 10% two months after the sale.
Cash Sales Credit Sales
January $50,000 $50,000
February $70,000 $110,000
March $55,000 $95,000
April $78,000 $130,000
May $80,000 $105,000
June $75,000 $148,000
What are Mercer’s total cash receipts for the month of June?
A) $120,400
B) $147,000
C) $195,400
D) $213,000
16) ABC Corporation began operations on January 1st of this year with a cash balance of
$250,000. ABC had sales of $200,000 for the month of January, all on credit. ABC allows its
customers 30 days to pay. ABC’s expenses for January equal $150,000, and ABC’s ending
balance in accounts payable at January 31st is $50,000. In its cash budget for January, ABC’s
ending cash balance should be equal to
A) $300,000 because of GAAP accrual accounting rules.
B) $150,000.
C) $200,000.
D) $100,000.
17) JD Enterprises presents income statements for the first three months of this year. Revenues
are $1,000,000 in January, $1,200,000 in February, and $1,400,000 in March, while expenses
total $800,000 in January, $900,000 February, and $1,000,000 in March. Despite the positive
net income, the controller believes JD Enterprises needs to arrange short-term financing of
$300,000 to make payroll the next month. Which of the following statements is most correct?
A) The controller must have made a mistake since the company’s net income for the three
months is $900,000.
B) The company’s accounts receivable balance has decreased over the past three months.
C) The company’s accounts payable balance has increased over the past three months.
D) The company’s accounts receivable balance has increased and the accounts payable balance
has decreased over the past three months.
18) Which of the following statements is most correct concerning the relationship between a
company’s cash budget and its income statement?
A) If net income is positive for 3 or more months in a row, then cash flow must be positive.
B) If net income is positive, then cash flow must be positive.
C) If net income is positive, then cash flow could be positive or negative, but if net income is
negative, cash flow must also be negative.
D) Cash flow could be positive whether net income is positive or negative.
19) Buster Enterprises’ projected sales for the first six months of 2010 are given below:
Jan. $500,000 April $490,000
Feb. $740,000 May $740,000
Mar. $380,000 June $610,000
40% of sales are collected in cash at time of sale, 50% are collected in the month following the
sale, and the remaining 10% are collected in the second month following the sale. Cost of goods
sold is 60% of sales. Purchases are made in the month prior to the sales, and payments for
purchases are made in the month of the sale. Total other cash expenses are $40,000/month. The
company’s cash balance as of February 28, 2010 will be $25,000. Excess cash will be used to
retire short-term borrowing (if any). Buster Enterprises has no short term borrowing as of
February 28, 2010. Assume that the interest rate on short-term borrowing is 1% per month. The
company must have a minimum cash balance of $15,000 at the beginning of each month. What
is Buster Enterprises’ total cash receipts for April 2010?
A) $460,000
B) $490,000
C) $524,000
D) $560,000
20) Buster Enterprises’ projected sales for the first six months of 2010 are given below:
Jan. $500,000 April $490,000
Feb. $740,000 May $740,000
Mar. $380,000 June $610,000
40% of sales are collected in cash at time of sale, 50% are collected in the month following the
sale, and the remaining 10% are collected in the second month following the sale. Cost of goods
sold is 60% of sales. Purchases are made in the month prior to the sales, and payments for
purchases are made in the month of the sale. Total other cash expenses are $40,000/month. The
company’s cash balance as of February 28, 2010 will be $25,000. Excess cash will be used to
retire short-term borrowing (if any). Buster Enterprises has no short term borrowing as of
February 28, 2010. Assume that the interest rate on short-term borrowing is 1% per month. The
company must have a minimum cash balance of $15,000 at the beginning of each month. What
is Buster Enterprises’ total cash disbursements for April 2010?
A) $294,000
B) $334,000
C) $374,000
D) $414,000
21) Buster Enterprises’ projected sales for the first six months of 2010 are given below:
Jan. $500,000 April $490,000
Feb. $740,000 May $740,000
Mar. $380,000 June $610,000
40% of sales are collected in cash at time of sale, 50% are collected in the month following the
sale, and the remaining 10% are collected in the second month following the sale. Cost of goods
sold is 60% of sales. Purchases are made in the month prior to the sales, and payments for
purchases are made in the month of the sale. Total other cash expenses are $40,000/month. The
company’s cash balance as of February 28, 2010 will be $25,000. Excess cash will be used to
retire short-term borrowing (if any). Buster Enterprises has no short term borrowing as of
February 28, 2010. Assume that the interest rate on short-term borrowing is 1% per month. The
company must have a minimum cash balance of $15,000 at the beginning of each month. What
is Buster Enterprises’ projected cash balance at the end of March 2010?
A) $301,000
B) $329,000
C) $352,000
D) $361,000
22) Buster Enterprises’ projected sales for the first six months of 2010 are given below:
Jan. $500,000 April $490,000
Feb. $740,000 May $740,000
Mar. $380,000 June $610,000
40% of sales are collected in cash at time of sale, 50% are collected in the month following the
sale, and the remaining 10% are collected in the second month following the sale. Cost of goods
sold is 60% of sales. Purchases are made in the month prior to the sales, and payments for
purchases are made in the month of the sale. Total other cash expenses are $40,000/month. The
company’s cash balance as of February 28, 2010 will be $25,000. Excess cash will be used to
retire short-term borrowing (if any). Buster Enterprises has no short term borrowing as of
February 28, 2010. Assume that the interest rate on short-term borrowing is 1% per month. The
company must have a minimum cash balance of $15,000 at the beginning of each month. .
What is Buster Enterprises’ earnings before interest and taxes for April 2010?
A) $156,000
B) $142,000
C) $133,000
D) $ 93,000
23) A firm’s cash position would most likely be helped by
A) delaying payment of accounts payable.
B) more liberal credit policies for their customers.
C) purchasing land for investment purposes.
D) holding larger inventories.
24) A firm’s cash position would most likely be hurt by
A) decreasing excess inventory.
B) establishing stricter (shorter) credit terms.
C) retiring outstanding debt.
D) increasing the net profit margin.
25) All of the following are found in the cash budget except:
A) a net change in cash for the period.
B) accounts receivable.
C) cash disbursements.
D) new financing needed.
26) The primary purpose of a cash budget is to
A) determine the level of investment in current and fixed assets.
B) determine financing needs.
C) provide a detailed plan of future cash flows.
D) determine the estimated income tax for the year.
27) Which of the following is always a non-cash expense?
A) income taxes
B) salaries
C) depreciation
D) none of the above
28) A company collects 25% of its sales during the month of sale, 65% one month after the sale,
and 10% two months after the sale. The company expects sales of $50,000 in August, $80,000 in
September, $90,000 in October, and $60,000 in November. How much money is expected to be
collected in October?
A) $90,000
B) $79,500
C) $55,000
D) $22,500
29) Dorian Industries’ projected sales for the first six months of 2010 are given below:
Jan. $250,000 April $300,000
Feb. $340,000 May $350,000
Mar. $280,000 June $380,000
20% of sales are collected in cash at time of sale, 50% are collected in the month following the
sale, and the remaining 30% are collected in the second month following the sale. Cost of goods
sold is 85% of sales. Purchases are made in the month prior to the sales, and payments for
purchases are made in the month of the sale. Total other cash expenses are $70,000/month. The
company’s cash balance as of February 28, 2010 will be $10,000. Excess cash will be used to
retire short-term borrowing (if any). Dorian has no short term borrowing as of February 28,
2010. Ignore any interest on short-term borrowing. The company must have a minimum cash
balance of $40,000 at the beginning of each month. What is Dorian Industries’ total cash receipts
for April 2010?
A) $340,000
B) $326,000
C) $302,000
D) $300,000
30) Dorian Industries’ projected sales for the first six months of 2010 are given below:
Jan. $250,000 April $300,000
Feb. $340,000 May $350,000
Mar. $280,000 June $380,000
20% of sales are collected in cash at time of sale, 50% are collected in the month following the
sale, and the remaining 30% are collected in the second month following the sale. Cost of goods
sold is 85% of sales. Purchases are made in the month prior to the sales, and payments for
purchases are made in the month of the sale. Total other cash expenses are $70,000/month. The
company’s cash balance as of February 28, 2010 will be $10,000. Excess cash will be used to
retire short-term borrowing (if any). Dorian has no short term borrowing as of February 28,
2010. Ignore any interest on short-term borrowing. The company must have a minimum cash
balance of $40,000 at the beginning of each month. What is Dorian Industries’ total disbursement
in May?
A) $367,500
B) $348,000
C) $425,500
D) $324,000
31) Dorian Industries’ projected sales for the first six months of 2010 are given below:
Jan. $250,000 April $300,000
Feb. $340,000 May $350,000
Mar. $280,000 June $380,000
20% of sales are collected in cash at time of sale, 50% are collected in the month following the
sale, and the remaining 30% are collected in the second month following the sale. Cost of goods
sold is 85% of sales. Purchases are made in the month prior to the sales, and payments for
purchases are made in the month of the sale. Total other cash expenses are $70,000/month. The
company’s cash balance as of February 28, 2010 will be $10,000. Excess cash will be used to
retire short-term borrowing (if any). Dorian has no short term borrowing as of February 28,
2010. Ignore any interest on short-term borrowing. The company must have a minimum cash
balance of $40,000 at the beginning of each month. What is Dorian Industries’ ending cash
balance (before borrowing) in March?
A) $12,000
B) $8,000
C) $3,000
D) ($28,000)
32) Dorian Industries’ projected sales for the first six months of 2010 are given below:
Jan. $250,000 April $300,000
Feb. $340,000 May $350,000
Mar. $280,000 June $380,000
20% of sales are collected in cash at time of sale, 50% are collected in the month following the
sale, and the remaining 30% are collected in the second month following the sale. Cost of goods
sold is 85% of sales. Purchases are made in the month prior to the sales, and payments for
purchases are made in the month of the sale. Total other cash expenses are $70,000/month. The
company’s cash balance as of February 28, 2010 will be $10,000. Excess cash will be used to
retire short-term borrowing (if any). Dorian has no short term borrowing as of February 28,
2010. Ignore any interest on short-term borrowing. The company must have a minimum cash
balance of $40,000 at the beginning of each month. Dorian’s projected cumulative short-term
borrowing as of April 30, 2010?
A) $25,000
B) $33,000
C) $50,000
D) $60,000
33) Dorian Industries’ projected sales for the first six months of 2010 are given below:
Jan. $250,000 April $300,000
Feb. $340,000 May $350,000
Mar. $280,000 June $380,000
20% of sales are collected in cash at time of sale, 50% are collected in the month following the
sale, and the remaining 30% are collected in the second month following the sale. Cost of goods
sold is 85% of sales. Purchases are made in the month prior to the sales, and payments for
purchases are made in the month of the sale. Total other cash expenses are $70,000/month. The
company’s cash balance as of February 28, 2010 will be $10,000. Excess cash will be used to
retire short-term borrowing (if any). Dorian has no short term borrowing as of February 28,
2010. Ignore any interest on short-term borrowing. The company must have a minimum cash
balance of $40,000 at the beginning of each month. Dorian’s projected EBIT for March 2010?
A) $42,000
B) $23,000
C) ($28,000)
D) ($60,000)
34) Fielding Wilderness Outfitters had projected its sales for the first six months of 2010 to be as
follows:
Jan. $250,000 April $300,000
Feb. $340,000 May $350,000
Mar. $280,000 June $380,000
Cost of goods sold is 60% of sales. Purchases are made and paid for two months prior to the sale.
40% of sales are collected in the month of the sale, 40% are collected in the month following the
sale, and the remaining 20% in the second month following the sale. Total other cash expenses
are $40,000/month. The company’s cash balance as of March 1st, 2010 is projected to be
$40,000, and the company wants to maintain a minimum cash balance of $15,000. Excess cash
will be used to retire short-term borrowing (if any exists). Fielding has no short-term borrowing
as of March 1st, 2010. Assume that the interest rate on short-term borrowing is 1% per month.
What is Fielding’s projected total receipts (collections) for April?
A) $124,000
B) $180,000
C) -$4,000
D) $36,000
35) Fielding Wilderness Outfitters had projected its sales for the first six months of 2010 to be as
follows:
Jan. $ 50,000 April $180,000
Feb. $ 60,000 May $240,000
Mar. $100,000 June $240,000
Cost of goods sold is 60% of sales. Purchases are made and paid for two months prior to the sale.
40% of sales are collected in the month of the sale, 40% are collected in the month following the
sale, and the remaining 20% in the second month following the sale. Total other cash expenses
are $40,000/month. The company’s cash balance as of March 1st, 2010 is projected to be
$40,000, and the company wants to maintain a minimum cash balance of $15,000. Excess cash
will be used to retire short-term borrowing (if any exists). Fielding has no short-term borrowing
as of March 1st, 2010. Assume that the interest rate on short-term borrowing is 1% per month.
What was Fielding’s projected loss for March?
A) $184,000
B) $110,000
C) $84,000
D) none of the above
36) Fielding Wilderness Outfitters had projected its sales for the first six months of 2010 to be as
follows:
Jan. $ 50,000 April $180,000
Feb. $ 60,000 May $240,000
Mar. $100,000 June $240,000
Cost of goods sold is 60% of sales. Purchases are made and paid for two months prior to the sale.
40% of sales are collected in the month of the sale, 40% are collected in the month following the
sale, and the remaining 20% in the second month following the sale. Total other cash expenses
are $40,000/month. The company’s cash balance as of March 1st, 2010 is projected to be
$40,000, and the company wants to maintain a minimum cash balance of $15,000. Excess cash
will be used to retire short-term borrowing (if any exists). Fielding has no short-term borrowing
as of March 1st, 2010. Assume that the interest rate on short-term borrowing is 1% per month.
How much short term financing is needed by March 30, 2010?
A) $110,000
B) $15,000
C) $70,000
D) $85,000
37) Thompson Manufacturing Supplies’ projected sales for the first six months of 2010 are given
below.
Jan. $300,000 April $350,000
Feb. $350,000 May $500,000
Mar. $475,000 June $400,000
20% of sales are collected in the month of the sale, 75% are collected in the month following the
sale, and 5% are written off as uncollectible. Cost of goods sold is 80% of sales. Purchases are
made the month prior to the sales and are paid during the month the purchases are made (i.e.
goods sold in March are bought and paid for in February). Total other cash expenses are
$35,000/month. The company’s cash balance as of February 1, 2010 will be $30,000. Excess
cash will be used to retire short-term borrowing (if any). Thompson has no short term borrowing
as of February 28, 2010. Assume that the interest rate on short-term borrowing is 1% per month.
The company must have a minimum cash balance of $20,000 at the beginning of each month.
What is Thompson’s projected total disbursements for April?
A) $422,918
B) $435,686
C) $398,833
D) $375,655
38) Thompson Manufacturing Supplies’ projected sales for the first six months of 2010 are given
below.
Jan. $300,000 April $350,000
Feb. $350,000 May $500,000
Mar. $475,000 June $400,000
20% of sales are collected in the month of the sale, 75% are collected in the month following the
sale, and 5% are written off as uncollectible. Cost of goods sold is 80% of sales. Purchases are
made the month prior to the sales and are paid during the month the purchases are made (i.e.
goods sold in March are bought and paid for in February). Total other cash expenses are
$35,000/month. The company’s cash balance as of February 1, 2010 will be $30,000. Excess
cash will be used to retire short-term borrowing (if any). Thompson has no short term borrowing
as of February 28, 2010. Assume that the interest rate on short-term borrowing is 1% per month.
The company must have a minimum cash balance of $20,000 at the beginning of each month.
What is Thompson’s projected gross profit for April?
A) ($50,000)
B) $70,000
C) $100,000
D) $110,550
39) Thompson Manufacturing Supplies’ projected sales for the first six months of 2010 are given
below.
Jan. $300,000 April $350,000
Feb. $350,000 May $500,000
Mar. $475,000 June $400,000
20% of sales are collected in the month of the sale, 75% are collected in the month following the
sale, and 5% are written off as uncollectible. Cost of goods sold is 80% of sales. Purchases are
made the month prior to the sales and are paid during the month the purchases are made (i.e.
goods sold in March are bought and paid for in February). Total other cash expenses are
$35,000/month. The company’s cash balance as of February 1, 2010 will be $30,000. Excess
cash will be used to retire short-term borrowing (if any). Thompson has no short term borrowing
as of February 28, 2010. Assume that the interest rate on short-term borrowing is 1% per month.
The company must have a minimum cash balance of $20,000 at the beginning of each month.
What is Thompson’s projected total receipts (collections) for March?
A) $357,500
B) $310,000
C) $456,000
D) $475,000
40) Thompson Manufacturing Supplies’ projected sales for the first six months of 2010 are given
below.
Jan. $300,000 April $350,000
Feb. $350,000 May $500,000
Mar. $475,000 June $400,000
20% of sales are collected in the month of the sale, 75% are collected in the month following the
sale, and 5% are written off as uncollectible. Cost of goods sold is 80% of sales. Purchases are
made the month prior to the sales and are paid during the month the purchases are made (i.e.
goods sold in March are bought and paid for in February). Total other cash expenses are
$35,000/month. The company’s cash balance as of February 1, 2010 will be $30,000. Excess
cash will be used to retire short-term borrowing (if any). Thompson has no short term borrowing
as of February 28, 2010. Assume that the interest rate on short-term borrowing is 1% per month.
The company must have a minimum cash balance of $20,000 at the beginning of each month.
What is Thompson’s projected cumulative borrowing as of March 1, 2010?
A) $110,000
B) $90,000
C) $70,000
D) -0-
41) Thompson Manufacturing Supplies’ projected sales for the first six months of 2010 are given
below.
Jan. $300,000 April $350,000
Feb. $350,000 May $500,000
Mar. $475,000 June $400,000
20% of sales are collected in the month of the sale, 75% are collected in the month following the
sale, and 5% are written off as uncollectible. Cost of goods sold is 80% of sales. Purchases are
made the month prior to the sales and are paid during the month the purchases are made (i.e.
goods sold in March are bought and paid for in February). Total other cash expenses are
$35,000/month. The company’s cash balance as of February 1, 2010 will be $30,000. Excess
cash will be used to retire short-term borrowing (if any). Thompson has no short term borrowing
as of February 28, 2010. Assume that the interest rate on short-term borrowing is 1% per month.
The company must have a minimum cash balance of $20,000 at the beginning of each month.
What is Thompson’s projected cash balance as of April 1, 2010?
A) ($48,600)
B) ($58,036)
C) $14,238
D) $21,400