Question

The Matisse Company’s sales are all on account. Thirty-five percent of the sales on account are collected in the month of sale, 45% in the month following the sale and the remainder are collected in the second month following the sale. Budgeted sales are $50,000 for January, $60,000 for February, $40,000 for March and $30,000 for April. What is the amount of cash that should be collected in March?

1)

$24,000.

2)

$41,000.

3)

$37,000.

4)

$51,000.

The Unicorn Co. plans to sell 23,000 unicorn blankets during August. If the company has 8,000 units on hand at the start of the month, and plans to have 9,000 units on hand at the end of the month, how many units must be produced during the month?

1)

24,000

2)

22,000.

3)

32,000.

4)

31,000.

Sparks Corporation has a cash balance of $18,000 on April 1. The company must maintain a
minimum cash balance of $10,000. During April, expected cash receipts are $98,000. Cash disbursements during the month are expected to total $112,000. Ignoring interest payments, during April the company will need to borrow:

1)

$8,000.

2)

$2,000.

3)

$4,000.

4)

$6,000.

Answer 1

Answer :

1. Option - D, $51,000

Explanation :

The amount of cash that should be collected in March :

= 20% of Jan sales + 45% of Feb sales + 35% of March sales

= (20% x $50,000) + (45% x $60,000) + (35% x $40,000)

= $10,000 + $27,000 + $14,000

= $51,000

2. Option - A, 24,000 units

Explanation :

No. of units to be produced during the month:

= Closing stock + Budgeted sales - Opening stock

= 9,000 units + 23,000 units - 8,000 units

= 24,000 units

3. Option - D, $6,000

Explanation :

Calculation of amount company will need to borrow:

Ending balance = Beginning balance + Cash receipt - Cash payments + Borrowed amount

$10,000 = $18,000 + $98,000 - $112,000 + Borrowed amount

$10,000 = $4,000 + Borrowed amount

Borrowed amount = $10,000 - $4,000

Borrowed amount = $6,000