Question

LO 4 Joshua Studios expects the following sales in March, April, and May:

	Cash Sales	Credit Sales
March	$55,000	$240,000
April	50,000	250,000
May	75,000	300,000

The controller has determined that the company collects credit sales in the following pattern: 30% in the month of sale, 50% in the first month after sale, 10% in the second month after sale, and 10% uncollectible. How much cash will be collected from customers in May?(a)

$ 75,000

(b)

$239,000

(c)

$290,000

(d)

$314,000

LO 4 Sleep Systems, Inc. budgeted the following selling and administrative expenses for July:

Utilities	$8,500
Advertising	675
Office equipment depreciation	1,230
Supplies	530
Bad debts	1,920

How much will Sleep Systems, Inc. show on its July cash budget for selling and administrative expenses?(a)

$12,855

(b)

$11,625

(c)

$9,705

(d)

$3,150

  

LO 4 Marvin's Garden Supply is preparing its cash budget for the fourth quarter. The inventory manager has provided the following budgeted materials purchases amounts: October—$58,000, November—$80,000, December—$74,000. Historically, Marvin's has paid for 20% of its purchases in the month of purchase, 70% in the month following the purchase, and 10% in the second month after the purchase. What is Marvin's budgeted cash payments for purchases in December?

(a)

$80,000

(b)

$76,600

(c)

$74,000

(d)

$56,000

Answer 1

1
	May
Cash Sales	75000
Credit sales:
From March sales	24000	=240000*10%
From April sales	125000	=250000*50%
From May sales	90000	=300000*30%
Cash collected from customers in May	314000
Option D is correct
2
Utilities	8500
Advertising	675
Supplies	530
Amount of Cash for selling and administrative expenses	9705
Option C is correct
Note: Office equipment depreciation and Bad debts is non cash expense
3
	December
For October purchases	5800	=58000*10%
For November purchases	56000	=80000*70%
For December purchases	14800	=74000*20%
Budgeted cash payments for purchases in December	76600
Option B is correct