Chapter 9 - Master Budgeting

Which of the following alternatives reflects the proper order of preparing components of the master budget? 1. Financial Budget 2. Operating Budget 3. Capital Expenditures Budget

2,3,1

The cash budget combines these things to determine whether there is an excess or deficiency of cash.

Beginning cash, cash receipts and cash disbursements

Which of the following is an example of a financial budget?

Budgeted balance sheet

Which of the following budgets is an operating budget?

Budgeted income statement

A company had sales last month of $120,000 and expects sales this month of $150,000. One third of all sales are cash sales. Two thirds of all sales are collected in the month following the sale. The company should expect total cash collections from sales this month to equal __________.

Cash collections should equal 1 / 3 ($150,000) + 2 / 3 ($120,000) = $130,000

Which of the following statements regarding the budgeting process is true?

Managers prepare short term and long term budgets

Budgets that plan an organization's ending financial position are called __________.

Master Budget

Budgets that plan a year's basic activities and the needed resources are called __________.

Operating Budgets

A company has a $7,200 cash balance at June 1. The budgeted cash transactions for June are receipts of $53,800 and disbursements of $67,500. If the company's minimum June 30 cash balance is $5,000, what is the budgeted amount to be borrowed during June?

The amount of borrowing is the cash available less the cash required: $7,200 + $53,800 - $67,500 - $5,000 = $11,500 (the cash deficiency).

The beginning inventory of Drucker & co., is $100,000. The desired ending inventory is 80% of beginning inventory. If cost of goods sold is $300,000, purchases will always:

be less than cost of goods sold

Annual master budgets are expressed as 12 monthly target, wherein as one month ends, another month is added to the budget are called __________.

rolling budgets