# 7 gamma corp is preparing their budget for the 1st quarter of 2015 the following dat 4306869

7) Gamma Corp. is preparing their budget for the 1st quarter of 2015. The following data is provided:

 Inventory, Purchases and COGS Budget Jan Feb Mar Cost of goods sold (a) \$30,000 \$28,500 \$22,500 Desired ending inventory(b) 10,700 9,500 9,800 Total inventory required 40,700 38,000 32,300 less Beginning inventory -11,000 -10,700 -9,500 Purchases 29,700 27,300 22,800 (a) COGS = 75% of sales (b) \$5,000 + 20% of COGS for next month

The amount of Merchandise Inventory to be shown on the budgeted balance sheet at March 31 would be:

A) \$9,500.

B) \$10,700.

C) \$8,750.

D) \$9,800.

8) From the following details, provided by a merchandiser, prepare the selling and administrative expenses budget for the first quarter of the next year.

 Rent Expense \$8,000 per month Depreciation Expense \$ 3,500 per month Insurance Expense \$1,250 per month Miscellaneous Expense 2% of sales, paid as incurred Commissions Expense 10% of sales Salaries Expense \$7,000 per month
 Jan Feb March Sales \$50,000 \$65,000 \$80,000

Learning Objective 22-7

1) The financial budget of a merchandiser is similar to that of a manufacturer.

2) The budgeted income statements of both manufacturing and merchandising companies include a calculation of gross profit.

3) While calculating the cash payments for budgeted selling and administrative expenses, non-cash expenses like depreciation are also considered.

4) Freightcan Holders has provided the following extracts from their budget for the first quarter of the forthcoming year:

 Jan Feb March Sales (30% cash) \$500,000 \$750,000 \$1,000,000

The company collects 60% of credit sales in the same month and the balance in the next month. Calculate the collections from the customers for the month of February.

A) \$ 580,000

B) \$720,000

C) \$680,000

D) \$490,000

5) Freightcan Holders has provided the following extracts from their budget for the first quarter of the forthcoming year:

 Jan Feb March Purchases on account \$280,000 \$295,000 \$310,000

The vendors allowed terms of payment as follows:

 Month of purchase 25% First month after the purchase 50% of the balance Second month after the purchase balance 50%

Calculate the total payment on account for the month of March.

A) \$259,625

B) \$563,245

C) \$325,643

D) \$293,125

6) The following details have been extracted from the budget of a merchandiser.

 Rent Expense \$8,000 per month Depreciation Expense \$ 3,500 per month Insurance Expense \$1,250 per month Miscellaneous Expense 2% of sales, paid as incurred Commissions Expense 10% of sales Salaries Expense \$7,000 per month
 Dec Jan Feb March Sales \$45,000 \$50,000 \$65,000 \$80,000

Commission and salaries expenses are paid 50% in the month to which they relate and the balance in the next month.

Rent and miscellaneous expenses are paid as and when they occur. Insurance is prepaid at the beginning of the quarter. Calculate cash payments for the selling and administrative expenses for the first quarter of the next year.

A) \$70,400

B) \$50,500

C) \$75,000

D) \$62,750

7) Uncle&#39;s Caps, a merchandiser, has provided the following budgeted amounts for the next budget period.

 Balance of cash at the beginning \$30,000 Cash collections 680,000 Payments for: Purchase of inventory 350,000 Selling and administrative expenses 70,400 Capital expenditures 89,000

A minimum cash balance of \$250,000 is required to be maintained. The company can borrow in increments of \$10,000 as and when required. Assume the company can borrow the needed funds at the end of the period. Calculate the ending cash balance for the budget period.

A) \$320,300

B) \$250,600

C) \$300,000

D) \$540,230

8) While preparing the budgeted income statement of a merchandiser, the amount of cost of goods sold can be taken from:

A) the budgeted balance sheet.

B) the budgeted cash flow statement.

C) the inventory, purchases and COGS budget.

D) the payment for cost of goods sold.

9) Uncle&#39;s Caps, a merchandiser, wants to prepare the budgeted balance sheet for the next budget period. For this purpose the amount of ending cash balance can be retrieved from:

A) the sales budget.

B) the budgeted funds flow statement.

C) the cash budget.

D) the Cost of Goods Sold budget.

10) The amount of accumulated depreciation for the budgeted balance sheet can be obtained from:

A) the selling and administrative expenses budget.

B) the selling and administrative expenses budget and the prior balance sheet.

C) the cash payments for S&A expenses budget.

D) the financial budget.

11) The final step in the process of creating the master budget is the preparation of:

A) the operating budget

B) the budgeted balance sheet.

C) the budgeted cash flow statement.

D) the cash payments for expenses.

12) In the cash flow statement, all cash receipts and payments are categorized into: Operating activities, Financing activities and:

A) Investing activities.

B) Merchandising activities.

C) Budgeting activities.

D) Controlling activities.