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Set E (MC), Question and Answers Chapter 20 - Budgeting

The document contains 49 multiple choice questions about budgeting concepts including: - Estimated cash payments do not include notes and accounts receivable collections. - Management accountants provide a minimum cash balance as a safety buffer for variations in estimates. - For Wright Corporation, the cash collections from accounts receivable in October are $216,000. - Planning for capital expenditures is necessary except that amounts spent for office equipment may be immaterial.

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217 views

Set E (MC), Question and Answers Chapter 20 - Budgeting

The document contains 49 multiple choice questions about budgeting concepts including: - Estimated cash payments do not include notes and accounts receivable collections. - Management accountants provide a minimum cash balance as a safety buffer for variations in estimates. - For Wright Corporation, the cash collections from accounts receivable in October are $216,000. - Planning for capital expenditures is necessary except that amounts spent for office equipment may be immaterial.

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John Carlos Doringo
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Chapter 20 — Budgeting (MULTIPLE CHOICE)

41. Estimated cash payments are planned reductions in cash from all of the following except:
a. manufacturing and operating expenses
b. capital expenditures
c. notes and accounts receivable collections
d. payments for interest or dividends
ANS: C DIF: 1 OBJ: 05

42. Management accountants usually provide for a minimum cash balance in their cash budgets for
which of the following reasons:
a. stockholders demand a minimum cash balance
b. it is an important way of effectively managing cash
c. it provides a safety buffer for variations in estimates
d. to have funds available for major capital expenditures
ANS: C DIF: 1 OBJ: 05

43. Wright Corporation began its operations on September 1 of the current year. Budgeted sales for
the first three months of business are $240,000, $300,000, and $420,000, respectively, for
September, October, and November. The company expects to sell 20% of its merchandise for
cash. Of sales on account, 70% are expected to be collected in the month of the sale, 25% in the
month following the sale, and the remainder in the following month. The cash collectio ns from
accounts receivable in September are:
a. $240,000
b. $134,400
c. $192,000
d. $168,000
ANS: B DIF: 3 OBJ: 05

44. Wright Corporation began its operations on September 1 of the current year. Budgeted sales for
the first three months of business are $240,000, $300,000, and $420,000, respectively, for
September, October, and November. The company expects to sell 20% of its merchandise for
cash. Of sales on account, 70% are expected to be collected in the month of the sale, 25% in the
month following the sale, and the remainder in the following month. The cash collections
from accounts receivable in October are:
a. $216,000
b. $240,000
c. $210,000
d. $288,000
ANS: A DIF: 3 OBJ: 05
45. Wright Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $240,000, $300,000, and $420,000,
respectively, for September, October, and November. The company expects to sell 20% of its
merchandise for cash. Of sales on account, 70% are expected to be collected in the month of the
sale, 25% in the month following the sale, and the remainder in the following month. The cash
collections from accounts receivable in November are:
a. $294,000
b. $336,000
c. $295,200
d. $304,800
ANS: D DIF: 3 OBJ: 05

46. Kidder Company began its operations on March 31 of the current year. Projected manufacturing
costs for the first three months of business are $156,800, $195,200, and $217,600, respectively,
for April, May, and June. Depreciation, insurance, and property taxes represent $28,800 of the
estimated monthly manufacturing costs. Insurance was paid on March 31, and property taxes will
be paid in November. Three-fourths of the remainder of the manufacturing costs are expected to
be paid in the month in which they are incurred, with the balance to be paid in the following
month. The cash payments for manufacturing in the month of April are:
a. $128,000
b. $96,000
c. $156,800
d. $117,000
ANS: B DIF: 3 OBJ: 05

47. Kidder Company began its operations on March 31 of the current year. Projected manufacturing
costs for the first three months of business are $156,800, $195,200, and $217,600, respectively,
for April, May, and June. Depreciation, insurance, and property taxes represent $28,800 of the
estimated monthly manufacturing costs. Insurance was paid on March 31, and property taxes will
be paid in November. Three-fourths of the remainder of the manufacturing costs are expected to
be paid in the month in which they are incurred, with the balance to be paid in the following
month. The cash payments for manufacturing in the month of May are:
a. $156,800
b. $195,200
c. $166,400
d. $146,400
ANS: A DIF: 3 OBJ: 05

48. Kidder Company began its operations on March 31 of the current year. Projected manufacturing
costs for the first three months of business are $156,800, $195,200, and $217,600, respectively,
for April, May, and June. Depreciation, insurance, and property taxes represent $28,800 of the
estimated monthly manufacturing costs. Insurance was paid on March 31, and property taxes will
be paid in November. Three-fourths of the remainder of the manufacturing costs are expected to
be paid in the month in which they are incurred, with the balance to be paid in the following
month. The cash payments for manufacturing in the month of June are:
a. $14,600
b. $188,800
c. $217,600
d. $183,200
ANS: D DIF: 3 OBJ: 05
49. Planning for capital expenditures is necessary for all of the following reasons except:
a. machinery and other fixed assets wear out
b. expansion may be necessary to meet increased demand
c. amounts spent for office equipment may be immaterial
d. fixed assets may fall below minimum standards of efficiency
ANS: C DIF: 1 OBJ: 05

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