EXAM 7 - EXAM 7 1. The LaGrange Company had the following...

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EXAM 7 1. The LaGrange Company had the following budgeted sales for the first half of the current year: The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled: Collections on sales: 60% in month of sale 30% in month following sale 10% in second month following sale The accounts receivable balance on January 1 of the current year was $70,000, of which $50,000 represents uncollected December sales and $20,000 represents uncollected November sales. The total cash collected during January by LaGrange Company would be: A) $410,000 B) $254,000 C) $344,000 D) $331,500 Feedback: * December credit sales must be calculated as follows: $50,000 = (30% + 10%) x November sales, or $125,000. Points Earned: 0.0/1.0 Correct Answer(s): D 2. Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget
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preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below. The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the next month's merchandise sales (stated at cost). All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable selling and administrative expenses should be 10% of sales and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable selling and administrative expenses are made during the month the expenses are incurred. The Accounts Receivable balance that would appear in the March 31 budgeted balance sheet would be: A) $15,000 B) $16,000 C) $8,800 D) $12,400 Feedback: Points Earned: 1.0/1.0 Correct Answer(s): C 3. The selling and administrative expense budget of Spurlock Corporation is based on budgeted unit sales, which are 6,300 units for February. The variable selling and administrative expense is $9.30 per unit. The budgeted fixed selling and administrative expense is $118,440 per month, which includes depreciation of $19,530 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the February selling and administrative expense budget should be: A) $98,910 B) $157,500 C) $58,590
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D) $177,030 Feedback: Cash disbursements for December = (Variable selling and administrative cost x Number of direct-labor hours) + (Fixed manufacturing overhead less depreciation) = (6,300 x $9.30) + ($118,440 - $19,530) = $58,590 + $98,910 = $157,500 Points Earned: 1.0/1.0 Correct Answer(s): B 4. The Charade Company is preparing its Manufacturing Overhead budget for the fourth
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EXAM 7 - EXAM 7 1. The LaGrange Company had the following...

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