Figure 8-5
The following forecasted sales pertain to Spyware Corporation:
Month Sales
September $40,000
October 50,000
November 30,000
December 20,000
Collection pattern:
65 percent in month of sale
35 percent in month following sale
Accounts receivable as of August 31 $7,000
Finished goods inventory as of August 31 1,500 units
Spyware Corporation has a selling price of $2.50 per unit and expects to maintain ending inventories equal to 25 percent of the next month's sales.
241. Refer to Figure 8-5. How many dollars are expected to be collected in September?
a. $7,000
b. $40,000
c. $33,000
d. $21,000
($40,000 × 0.65) + $7,000 = $33,000
242. Refer to Figure 8-5. How many dollars are expected to be collected in December?
a. $30,500
b. $37,000
c. $26,500
d. $23,500
(0.65 × $20,000) + (0.35 × $30,000) = $23,500
Figure 8-6
The records of Morgantown, Inc. show the following forecasted sales:
Month Sales
September $400,000
October 500,000
November 300,000
December 200,000
Collection pattern:
60 percent in month of sale
40 percent in month following the sale
Accounts receivable as of August 31 $70,000
Finished goods inventory as of August 31 8,000 units
The company has a selling price of $10 per unit and expects to maintain ending inventories equal to 20 percent of
next month's sales.
243. Refer to Figure 8-6. How many dollars are expected to be collected in October?
a. $420,000
b. $460,000
c. $240,000
d. $510,000
($500,000 × 0.60) + ($400,000 × 0.40) = $460,000
244. Refer to Figure 8-6. How much is Accounts Receivable as of October 31?
a. $420,000
b. $460,000
c. $240,000
d. none of the above
($500,000 × 0.40) = $200,000
245. Firefly Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 20 percent of total sales each month. Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 35 percent in the month after the sale, and the remaining 15 percent two months after the sale. Sales for the quarter are projected as follows: January, $60,000; February, $30,000; and March,
$90,000. Accounts receivable on December 31 were $45,000.
The expected cash collections of Firefly Manufacturing Company for March are
a. $90,000
b. $69,600
c. $64,500
d. $114,600
($90,000 × 0.20) + ($90,000 × 0.80 × 0.50) + ($30,000 × 0.80 ×0.35) + ($60,000 × 0.80 × 0.15) = $69,600
Figure 8-7
Macheski Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below:
The June 30th balance sheet follows:
Actual sales for June and budgeted sales for July, August, and September are given below:
June $137,500
July 360,000
August 400,000
September 320,000
Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in the month following the
sale. There are no bad debts.
The gross margin percentage is 40 percent of sales. The desired ending inventory is equal to 25 percent of the following month's sales. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month.
The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000.
246. Refer to Figure 8-7. What is the balance of the accounts receivable at the end of July?
a. $110,000
b. $288,000
c. $360,000
d. $398,000
80% × 360,000 = $288,000
247. Refer to Figure 8-7. What is the balance of the accounts payable at the end of July?
a. $55,500
b. $93,000
c. $120,000
d. $166,500
Purchases = $216,000 + (0.25 × $240,000) - $54,000 = $222,000 0.75 × $222,000 = $166,500
248. Refer to Figure 8-7. What is the balance of the inventory account at the end of July?
a. $54,000
b. $60,000
c. $124,000
d. $216,000
0.25 × (0.60 × $400,000) = $60,000
249. Refer to Figure 8-7. What is the balance of the building and equipment (net) account at the end of July?
a. $243,000
b. $250,000
c. $257,000
d. $300,000
$250,000 - $7,000 = $243,000
250. Refer to Figure 8-7. What is the balance of the retained earnings account at the end of July?
a. $94,000
b. $188,000
c. $360,000
d. $398,000
$94,000 + ($360,000 - $216,000 - $43,000 - $7,000) = $188,000
The following forecasted sales pertain to Spyware Corporation:
Month Sales
September $40,000
October 50,000
November 30,000
December 20,000
Collection pattern:
65 percent in month of sale
35 percent in month following sale
Accounts receivable as of August 31 $7,000
Finished goods inventory as of August 31 1,500 units
Spyware Corporation has a selling price of $2.50 per unit and expects to maintain ending inventories equal to 25 percent of the next month's sales.
241. Refer to Figure 8-5. How many dollars are expected to be collected in September?
a. $7,000
b. $40,000
c. $33,000
d. $21,000
($40,000 × 0.65) + $7,000 = $33,000
242. Refer to Figure 8-5. How many dollars are expected to be collected in December?
a. $30,500
b. $37,000
c. $26,500
d. $23,500
(0.65 × $20,000) + (0.35 × $30,000) = $23,500
Figure 8-6
The records of Morgantown, Inc. show the following forecasted sales:
Month Sales
September $400,000
October 500,000
November 300,000
December 200,000
Collection pattern:
60 percent in month of sale
40 percent in month following the sale
Accounts receivable as of August 31 $70,000
Finished goods inventory as of August 31 8,000 units
The company has a selling price of $10 per unit and expects to maintain ending inventories equal to 20 percent of
next month's sales.
243. Refer to Figure 8-6. How many dollars are expected to be collected in October?
a. $420,000
b. $460,000
c. $240,000
d. $510,000
($500,000 × 0.60) + ($400,000 × 0.40) = $460,000
244. Refer to Figure 8-6. How much is Accounts Receivable as of October 31?
a. $420,000
b. $460,000
c. $240,000
d. none of the above
($500,000 × 0.40) = $200,000
245. Firefly Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 20 percent of total sales each month. Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 35 percent in the month after the sale, and the remaining 15 percent two months after the sale. Sales for the quarter are projected as follows: January, $60,000; February, $30,000; and March,
$90,000. Accounts receivable on December 31 were $45,000.
The expected cash collections of Firefly Manufacturing Company for March are
a. $90,000
b. $69,600
c. $64,500
d. $114,600
($90,000 × 0.20) + ($90,000 × 0.80 × 0.50) + ($30,000 × 0.80 ×0.35) + ($60,000 × 0.80 × 0.15) = $69,600
Figure 8-7
Macheski Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below:
The June 30th balance sheet follows:
| Cash | $ 25,000 | Accounts payable | $ 45,000 |
| Accounts receivable | 110,000 | Capital stock | 300,000 |
| Inventory | 54,000 | Retained earnings | 94,000 |
| Building and equipment (net) | 250,000 |
Actual sales for June and budgeted sales for July, August, and September are given below:
June $137,500
July 360,000
August 400,000
September 320,000
Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in the month following the
sale. There are no bad debts.
The gross margin percentage is 40 percent of sales. The desired ending inventory is equal to 25 percent of the following month's sales. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month.
The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000.
246. Refer to Figure 8-7. What is the balance of the accounts receivable at the end of July?
a. $110,000
b. $288,000
c. $360,000
d. $398,000
80% × 360,000 = $288,000
247. Refer to Figure 8-7. What is the balance of the accounts payable at the end of July?
a. $55,500
b. $93,000
c. $120,000
d. $166,500
Purchases = $216,000 + (0.25 × $240,000) - $54,000 = $222,000 0.75 × $222,000 = $166,500
248. Refer to Figure 8-7. What is the balance of the inventory account at the end of July?
a. $54,000
b. $60,000
c. $124,000
d. $216,000
0.25 × (0.60 × $400,000) = $60,000
249. Refer to Figure 8-7. What is the balance of the building and equipment (net) account at the end of July?
a. $243,000
b. $250,000
c. $257,000
d. $300,000
$250,000 - $7,000 = $243,000
250. Refer to Figure 8-7. What is the balance of the retained earnings account at the end of July?
a. $94,000
b. $188,000
c. $360,000
d. $398,000
$94,000 + ($360,000 - $216,000 - $43,000 - $7,000) = $188,000
