MANAGERIAL ACCOUNTING REVISED EXAM 2 (Fall 2015) -REVIEW 16 WITH SOLUTION.

MANAGERIAL ACCOUNTING REVISED EXAM 2 (Fall 2015) -REVIEW 16 WITH SOLUTION. EXAM 2 (Fall 2015) MANAGERIAL ACCOUNTING 1. T. Jackson Retail seeks your assistance to develop cash and other budget information for May, June, and July. At April 30, the company had cash of $5,500, accounts receivable of $437,000, and accounts payable of $133,055. The budget is to be based on the following assumptions: SALES:≠ Each month's sales are billed on the last day of the month. Customers are allowed a 3% discount if payment is made within 10 days after the billing date. Receivables are recorded in the accounts at their gross amounts (not net of discounts). 55% of the billings are collected within the discount period; 30% are collected by the end of the month; 9% are collected by the end of the second month; and 6% turn out to be uncollectible. PURCHASES: 60% of all purchases of merchandise and the selling, general, and administrative expenses are paid in the month purchased and the remainder in the following month. The number of units in each month's ending inventory is equal to 125% of the next month's units of sales. The cost of each unit of inventory is $30. Selling, general, and administrative expenses, of which $3,000 is depreciation, are equal to 15% of the current month's sales. Actual and projected sales are as shown below: What are the budgeted merchandise purchases (in dollars) for May? A. $338,250 B. $355,500 C. $357,000 D. $375,750 Answer: A Solution: [11,900 + 1.25(11,400) - 1.25(11,900)]  $30 = $338,250 Porus Corporation makes and sells a single product called a Yute. The company is in the process of preparing its Selling and Administrative Expense Budget for the last quarter of the year. The following budget data are available: All of these expenses (except depreciation) are paid in cash in the month they are incurred. 2. If the total budget for selling and administrative expense for October is $493,300, then how many Yutes does the company plan to sell in (or budgeted production) for October? A. 17,500 units B. 17,000 units C. 17,200 units D. 16,700 units 3. If the company has budgeted to sell 20,000 Yutes in December, then the budgeted total cash disbursements for selling and administrative expenses for December would be: A. $546,000 B. $547,000 C. $189,000 D. $358,000 The Task Company is to begin operations in April. They have budgeted April sales of $30,000. May sales of $34,000, June sales of $40,000, July sales of $42,000, and August sales of $38,000. 10% of each month's sales will represent cash sales; 75% of the balance will be collected in the month following the sale, 17% the second month, 6% the third month and the balance is bad debts. 4. What is the amount of cash to be collected in the month of July? A. $34,022 B. $38,022 C. $42,000 D. $37,580 ($42,000  .10) + ($40,000  .90  .75) + ($34,000  .90  .17) + ($30,000  .90  .06) = $38,022 5. Assume the Task Company charges 1 1/2% on any balance that is not collected in the month following the month of sale. This charge will also change the collection percentages to 15% cash sales, 80% of the balance collected in the month following the sale, 16% the second month, 3% the third month. This stricter credit policy will reduce the estimated sales budgets by 7% each month. What is the amount of cash to be collected in July? A. $39,199 B. $35,312 C. $38,193 D. $36,242 $42,000  .93 = $39,060; $40,000  .93 = $37,200; $34,000  .93 = $31,620; $30,000  .93 = $27,900; ($39,060  .15) + ($37,200  .85  .80) + ($31,620  .85  .16  1.015) + ($27,900  .85  .03  1.015) = $36,242.