Rogers Corporation is preparing its cash budget for July. The budgeted beginning cash balance is $25,000. Budgeted cash receipts total $141,000 and budgeted cash disbursements total $139,000. The desired ending cash balance is $30,000.

Rogers Corporation is preparing its cash budget for July. The budgeted beginning cash balance is $25,000. Budgeted cash receipts total $141,000 and budgeted cash disbursements total $139,000. The desired ending cash balance is $30,000.

    101. The excess (deficiency) of cash available over disbursements for July is:

            A)      $23,000

            B)      $2,000

            C)      $166,000

            D)      $27,000

           

            Ans:  D     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  8     Level:  Easy

            Solution:

            Excess cash available over disbursements = Beginning cash balance + Budgeted cash receipts - Budgeted cash disbursements

            = $25,000 + $141,000 - $139,000 = $27,000

    102. To attain its desired ending cash balance for July, the company should borrow:

            A)      $30,000

            B)      $0

            C)      $3,000

            D)      $57,000

           

            Ans:  C     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  8     Level:  Easy

            Solution:

            Excess cash available over disbursements = Beginning cash balance + Budgeted cash receipts - Budgeted cash disbursements = $25,000 + $141,000 − $139,000 = $27,000

            Borrowing = Desired ending cash balance − Excess cash available over disbursements = $30,000 − $27,000 = $3,000

Use the following to answer questions 103-104:

Bries Corporation is preparing its cash budget for January. The budgeted beginning cash balance is $18,000. Budgeted cash receipts total $183,000 and budgeted cash disbursements total $188,000. The desired ending cash balance is $30,000.

    103. The excess (deficiency) of cash available over disbursements for January is:

            A)      $23,000

            B)      $13,000

            C)      ($5,000)

            D)      $201,000

           

            Ans:  B     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  8     Level:  Easy

            Solution:

            Excess cash available over disbursements = Beginning cash balance + Budgeted cash receipts − Budgeted cash disbursements = $18,000 + $183,000 − $188,000 = $13,000

    104. To attain its desired ending cash balance for January, the company should borrow:

            A)      $17,000

            B)      $0

            C)      $30,000

            D)      $43,000

           

            Ans:  A     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  8     Level:  Easy

            Solution:

            Excess cash available over disbursements = Beginning cash balance + Budgeted cash receipts − Budgeted cash disbursements = $18,000 + $183,000 − $188,000 = $13,000

            Borrowing = Desired ending cash balance − Excess cash available over disbursements = $30,000 − $13,000 = $17,000

Use the following to answer questions 105-106:

Muecke Inc. is working on its cash budget for April. The budgeted beginning cash balance is $40,000. Budgeted cash receipts total $150,000 and budgeted cash disbursements total $158,000. The desired ending cash balance is $50,000.

    105. The excess (deficiency) of cash available over disbursements for April will be:

            A)      $32,000

            B)      $190,000

            C)      $48,000

            D)      ($8,000)

           

            Ans:  A     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  8     Level:  Easy

            Solution:

            Excess cash available over disbursements = Beginning cash balance + Budgeted cash receipts − Budgeted cash disbursements = $40,000 + $150,000 − $158,000 = $32,000

    106. To attain its desired ending cash balance for April, the company needs to borrow:

            A)      $18,000

            B)      $0

            C)      $50,000

            D)      $82,000

           

            Ans:  A     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  8     Level:  Easy

            Solution:

            Excess cash available over disbursements = Beginning cash balance + Budgeted cash receipts - Budgeted cash disbursements = $40,000 + $150,000 - $158,000 = $32,000

            Borrowing = Desired ending cash balance − Excess cash available over disbursements = $50,000 − $32,000 = $18,000

Use the following to answer questions 107-108:

Varughese Inc. is working on its cash budget for March. The budgeted beginning cash balance is $33,000. Budgeted cash receipts total $182,000 and budgeted cash disbursements total $191,000. The desired ending cash balance is $40,000.

    107. The excess (deficiency) of cash available over disbursements for March will be:

            A)      $215,000

            B)      $42,000

            C)      $24,000

            D)      ($9,000)

           

            Ans:  C     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  8     Level:  Easy

            Solution:

            Excess cash available over disbursements = Beginning cash balance + Budgeted cash receipts − Budgeted cash disbursements = $33,000 + $182,000 − $191,000 = $24,000

    108. To attain its desired ending cash balance for March, the company needs to borrow:

            A)      $40,000

            B)      $0

            C)      $16,000

            D)      $64,000

           

            Ans:  C     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  8     Level:  Easy

            Solution:

            Excess cash available over disbursements = Beginning cash balance + Budgeted cash receipts − Budgeted cash disbursements = $33,000 + $182,000 − $191,000 = $24,000

            Borrowing = Desired ending cash balance − Excess cash available over disbursements = $40,000 − $24,000 = $16,000

Use the following to answer questions 109-113:

Carver Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow:

·       Sales are budgeted at $350,000 for November, $320,000 for December, and $300,000 for January.

·       Collections are expected to be 90% in the month of sale, 8% in the month following the sale, and 2% uncollectible.

·       The cost of goods sold is 75% of sales.

·       The company purchases 60% of its merchandise in the month prior to the month of sale and 40% in the month of sale. Payment for merchandise is made in the month following the purchase.

·       Other monthly expenses to be paid in cash are $24,700.

·       Monthly depreciation is $16,000.

·       Ignore taxes.

	Statement of Financial Position
	October 31
	Assets:
	Cash..................................................................................................	$    19,000
	Accounts receivable (net of allowance for uncollectible accounts).	77,000
	Inventory..........................................................................................	157,500
	Property, plant and equipment (net of $502,000 accumulated depreciation).................................................................................	1,002,000
	Total assets.......................................................................................	$1,255,500
	Liabilities and Stockholders’ Equity:
	Accounts payable.............................................................................	$   272,000
	Common stock.................................................................................	780,000
	Retained earnings.............................................................................	203,500
	Total liabilities and stockholders’ equity.........................................	$1,255,500

    109. The net income for December would be:

            A)      $32,900

            B)      $42,300

            C)      $39,300

            D)      $55,300

           

            Ans:  A     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  9     Level:  Hard

            Solution:

           

	Net sales [$320,000 × (100% − 2%)].......................	$313,600
	Cost of goods sold ($320,000 × 75%)......................	240,000
	Gross margin............................................................	73,600
	Depreciation expense...............................................	16,000
	Selling and administrative expense..........................	24,700
	Net income...............................................................	$  32,900

    110. The cash balance at the end of December would be:

            A)      $19,000

            B)      $156,600

            C)      $61,300

            D)      $137,600

           

            Ans:  B     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  10     Level:  Hard

            Solution:

           

		November	December
	October Accounts Receivable Balance ..........................................	$  77,000
	Collection of November Sales...........
	$350,000 × 90%..............................	315,000
	$350,000 × 8%................................		$  28,000
	Collection of December Sales............
	$320,000 × 90%..............................		288,000
	October Accounts Payable Balance...	(272,000)
	Payment for November Purchases.....
	($350,000 × 75%) × 40%................		(105,000)
	($320,000 × 75%) × 60%................		(144,000)
	Other cash monthly expenses.............	(24,700)	(24,700)
	Net cash inflow(outflow) per month..	$  95,300	$  42,300

	Beginning cash balance, October 31........................	$  19,000
	Add November net cash inflow................................	95,300
	Add December net cash inflow................................	42,300
	Ending cash balance, December 31.........................	$156,600

    111. The accounts receivable balance, net of uncollectible accounts, at the end of December would be:

            A)      $53,600

            B)      $83,400

            C)      $25,600

            D)      $32,000

           

            Ans:  C     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  10     Level:  Hard

            Solution:

           

           

    112. Accounts payable at the end of December would be:

            A)      $231,000

            B)      $96,000

            C)      $135,000

            D)      $240,000

           

            Ans:  A     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  10     Level:  Hard

            Solution:

		Sales	Cost of Goods Sold
	November...........................................	$350,000	$262,500
	December............................................	$320,000	$240,000
	January................................................	$300,000	$225,000

Purchases in December = ($225,000 × 60%) + ($240,000 × 40%)

= $135,000 + $96,000 = $231,000

    113. Retained earnings at the end of December would be:

            A)      $289,600

            B)      $276,200

            C)      $236,400

            D)      $203,500

           

            Ans:  B     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  10     Level:  Hard

            Solution:

           

	Net income calculation for November:
	Net sales ($350,000 × 98%).....................................	$343,000
	Less cost of goods sold ($350,000 × 75%)..............	262,500
	Gross margin............................................................	80,500
	Less depreciation expense........................................	16,000
	Less selling and administrative expense..................	24,700
	Net income...............................................................	$  39,800

	Net income calculation for December:
	Net sales [$320,000 × (100% − 2%)].......................	$313,600
	Less cost of goods sold ($320,000 × 75%)..............	240,000
	Gross margin............................................................	73,600
	Less depreciation expense........................................	16,000
	Less selling and administrative expense..................	24,700
	Net income...............................................................	$  32,900

Retained earnings in December = Retained earnings in October + Net income in November + Net income in December = $203,500 + $39,800 + $32,900 = $276,200