Use the information below to answer the two questions that follow. A company prepares its master budget for the second quarter on a monthly basis and has gathered the following budget data: April May $ 500,000 $ 660,000 $ June 860,000 1 Budgeted sales 2 Sales are made 70% for cash and 30% on credit. Credit sales are collected as follows: The month of sale 60% A month after sales 38% 2% Uncollectible (The company recognizes bad debt expenses in the month sales are made.) 3 Cost of goods sold for each month is 30% of sales. 4 Variable selling and administrative expenses (100% cash expenditure) are 20% of sales. 5 Fixed selling and administrative (S&A) expenses for each month are: $ 52,000 $ 19,000 Advertising Executive salaries Insurance Depreciation Total fixed S&A expenses 6 Inventory purchases paid for in May will be $15,000. 7 The company expects to borrow $20,000 on May 1. No principal will be repaid during the year; Interest at an annual rate of 12% is due monthly. 8 The company will declare and pay dividends of $25,000 in May. 10 How much is the budgeted net income for May? (Ignore taxes.) A $ 198,040 B S 202,000 C $ 201,800 D S 197,840 E None of the above. B$ с $ D $ 430,800 E None of the above. $ 29,000 $ 28,000 $ 128,000 11 If the beginning cash balance in May is expected to be $20,000, what will be the budgeted ending balance of cash in May? A $ 405,800 430,600 405,600
Use the information below to answer the two questions that follow. A company prepares its master budget for the second quarter on a monthly basis and has gathered the following budget data: April May $ 500,000 $ 660,000 $ June 860,000 1 Budgeted sales 2 Sales are made 70% for cash and 30% on credit. Credit sales are collected as follows: The month of sale 60% A month after sales 38% 2% Uncollectible (The company recognizes bad debt expenses in the month sales are made.) 3 Cost of goods sold for each month is 30% of sales. 4 Variable selling and administrative expenses (100% cash expenditure) are 20% of sales. 5 Fixed selling and administrative (S&A) expenses for each month are: $ 52,000 $ 19,000 Advertising Executive salaries Insurance Depreciation Total fixed S&A expenses 6 Inventory purchases paid for in May will be $15,000. 7 The company expects to borrow $20,000 on May 1. No principal will be repaid during the year; Interest at an annual rate of 12% is due monthly. 8 The company will declare and pay dividends of $25,000 in May. 10 How much is the budgeted net income for May? (Ignore taxes.) A $ 198,040 B S 202,000 C $ 201,800 D S 197,840 E None of the above. B$ с $ D $ 430,800 E None of the above. $ 29,000 $ 28,000 $ 128,000 11 If the beginning cash balance in May is expected to be $20,000, what will be the budgeted ending balance of cash in May? A $ 405,800 430,600 405,600
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Use the following information to answer the question number (11).
Transcribed Image Text:**Budget Planning and Analysis: Second Quarter**
A company prepares its master budget for the second quarter on a monthly basis, using the following data:
1. **Budgeted Sales:**
- April: $500,000
- May: $660,000
- June: $860,000
2. **Sales and Credit Collection:**
- 70% are cash sales, and 30% are credit sales.
- Credit sales are collected as follows:
- 60% in the sale month.
- 38% in the following month.
- 2% uncollectible (bad debt expenses are recognized in the sales month).
3. **Cost of Goods Sold (COGS):**
- Each month's COGS is 30% of sales.
4. **Variable Selling and Administrative Expenses:**
- 20% of sales, paid in cash.
5. **Fixed Selling and Administrative Expenses (S&A):**
- Advertising: $52,000
- Executive salaries: $19,000
- Insurance: $29,000
- Depreciation: $28,000
- Total: $128,000 per month
6. **Inventory Purchases:**
- Paid for in May: $15,000
7. **Borrowing:**
- The company plans to borrow $20,000 at the start of May.
- No principal repayments will occur this year.
- Interest at 12% annually is due monthly.
8. **Dividends:**
- $25,000 will be declared and paid in May.
**Questions to Answer:**
10. **What is the budgeted net income for May? (Ignoring taxes)**
- Options:
A. $198,040
B. $202,000
C. $201,800
D. $197,840
E. None of the above
11. **With a beginning cash balance of $20,000 in May, what is the budgeted ending cash balance?**
- Options:
A. $405,800
B. $430,600
C. $405,600
D. $430,800
E. None of the above
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