Assume the following budgeted information for a merchandising company:

• Budgeted sales (all on credit) for November, December, and January are $243,000, $213,000, and $204,000, respectively.
• Cash collections of credit sales are expected to be 75% in the month of sale and 25% in the month following the sale.
• The cost of goods sold is always 70% of sales.
• Each months ending inventory equals 15% of next months cost of goods sold.
• 30% of each months merchandise purchases are paid in the current month and the remainder is paid in the following month.
• Monthly selling and administrative expenses that are paid in cash in the month incurred total $22,500.
• Monthly depreciation expense is $22,000.

The expected cash collections from customers in December are:

Multiple Choice

• $230,535.

• $242,750.

• $220,500.

• $210,750.

• Which of the following statements is true regarding master budgets?

  Multiple Choice

• They usually include a cash budget and a budgeted income statement, but not a budgeted balance sheet.

• Most companies exclude selling and administrative expenses from the master budget because they are period expenses.

• They can be used to estimate a companys need to borrow money in the future.

• Generally speaking, they are prepared for manufacturing companies, but not merchandising companies.