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Bantam Industries has budgeted the following information for March: Bantam Industries has budgeted the following information for March: If there is a cash shortage, the company borrows money from the bank. All cash is borrowed at the beginning of the month in $1,000 increments and interest is paid monthly at 1% on the first day of the following month. The company had no debt before March 1<sup>st</sup>. How much cash will the company need to borrowed in March? A) $25,000 B) $29,000 C) The company should not need to borrow any cash in March D) $4,000 If there is a cash shortage, the company borrows money from the bank. All cash is borrowed at the beginning of the month in $1,000 increments and interest is paid monthly at 1% on the first day of the following month. The company had no debt before March 1st. How much cash will the company need to borrowed in March?


A) $25,000
B) $29,000
C) The company should not need to borrow any cash in March
D) $4,000

E) A) and B)
F) A) and C)

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The inventory purchases budget is based on which budget?


A) Cash budget
B) Sales budget
C) Selling and administrative expense budget
D) None of the choices is correct.

E) A) and B)
F) None of the above

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The master budget details:


A) Long-term objectives.
B) Intermediate objectives.
C) Short-term objectives.
D) All of the answers are correct.

E) A) and D)
F) A) and C)

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Which of the following budgets needs to be prepared prior to preparing an inventory purchases budget?


A) Selling and administrative expense budget
B) Sales budget
C) Cash budget
D) All of the answers are correct.

E) A) and B)
F) A) and C)

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The basic cash budget format is: Total cash available - Total cash disbursed = Surplus or shortage of cash +/- Effects of financing = Ending cash.

A) True
B) False

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Select the correct statement about the master budget.


A) The master budget is a group of detailed budgets and schedules representing the company's operating and financial plans for the past accounting period.
B) The master budget usually includes operating budgets and capital budgets, and pro forma financial statements.
C) The budgeting process usually begins with preparing the strategic budgets.
D) Preparing the master budget begins with the cash budget.

E) A) and D)
F) All of the above

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The cash budget is based on which budget?


A) Sales budget
B) Inventory purchases budget
C) Selling and administrative expense budget
D) All of the answers are correct.

E) A) and B)
F) A) and C)

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The cash budget includes three sections: (1) operating activities, (2) investing activities, and (3) financing activities.

A) True
B) False

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What budget is generally not included in a master budget?


A) Strategic budget
B) Capital budget
C) Operating budget
D) All of the answers are correct.

E) A) and B)
F) None of the above

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A schedule of cash receipts is often prepared in conjunction with the sales budget.

A) True
B) False

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Select the incorrect statement about budgeting committees.


A) Membership on the budget committee is restricted most often to accountants because the budget involves numbers.
B) Budget committees usually have responsibility for the coordination of budgeting activities.
C) The budget committee is responsible for settling disputes between various departments over budget matters.
D) One of the responsibilities of the budget committee is to monitor the organization's progress toward achieving its budget standards.

E) A) and D)
F) A) and C)

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One advantage of participatory budgeting is that it allows subordinates to perform the budgeting function thus freeing up upper management for more important tasks.

A) True
B) False

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If a financial statement is labeled "pro forma" this means that the statement was prepared by a professional accountant (usually the firm's auditor) following a prescribed format.

A) True
B) False

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Strategic planning deals with the establishment of long term company objectives.

A) True
B) False

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Which of the following is generally included in a sales budget?


A) Schedule of cash receipts for the projected sales
B) Desired ending inventory
C) Budgeted cost of goods sold
D) Schedule of cash payments for inventory purchases

E) A) and B)
F) C) and D)

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Purchases on account are given below: Purchases on account are given below: 55% of the month's purchases will be paid in the month of the purchase; the remaining 45% will be paid in the following month. How much will the cash payments for purchases be in December? A) $44,500 B) $50,000 C) $46,000 D) $45,500 55% of the month's purchases will be paid in the month of the purchase; the remaining 45% will be paid in the following month. How much will the cash payments for purchases be in December?


A) $44,500
B) $50,000
C) $46,000
D) $45,500

E) B) and D)
F) A) and C)

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Benton Company's sales budget shows the following expected total sales: Benton Company's sales budget shows the following expected total sales: The company expects 80% of its sales to be on account (credit sales) . Credit sales are collected as follows: 25% in the month of sale, 72% in the month following the sale with the remainder being uncollectible and written off. The total cash receipts during April would be: A) $16,000. B) $28,160. C) $24,640. D) $36,160. The company expects 80% of its sales to be on account (credit sales) . Credit sales are collected as follows: 25% in the month of sale, 72% in the month following the sale with the remainder being uncollectible and written off. The total cash receipts during April would be:


A) $16,000.
B) $28,160.
C) $24,640.
D) $36,160.

E) A) and B)
F) A) and C)

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What is the role of top management in a participative budgeting system?


A) Top management has no role - the budget is entirely developed by the lower-level employees.
B) Top management must always tighten employee-set budget standards to eliminate employees' attempts to build slack into the standards.
C) Top management must ensure that employee-generated objectives are consistent with those of the company.
D) All of the answers are correct.

E) A) and D)
F) None of the above

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Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: Desired ending inventory levels are 25% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be: A) $135,000. B) $165,000. C) $180,000. D) $225,000. Desired ending inventory levels are 25% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be:


A) $135,000.
B) $165,000.
C) $180,000.
D) $225,000.

E) B) and C)
F) All of the above

Correct Answer

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Purchases on account are given below: Purchases on account are given below: 55% of the month's purchases will be paid in the month of the purchase; the remaining 45% will be paid in the following month. How much will the cash payments for purchases be in November? A) $35,500 B) $34,500 C) $40,000 D) $36,000 55% of the month's purchases will be paid in the month of the purchase; the remaining 45% will be paid in the following month. How much will the cash payments for purchases be in November?


A) $35,500
B) $34,500
C) $40,000
D) $36,000

E) B) and D)
F) C) and D)

Correct Answer

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