CHAP 15 - Q3

DROPDOWN OPTIONS OF EACH ONE ARE DOWN BELOW

Attempts: Average: /3 3. Budgeting for cash Which of the following statements are true with regard to a cash budget? Check all that apply. Cash budgets can be used to plan, coordinate, and control a firm's activities. A cash budget is a forecasted statement that shows how a company's cash will be obtained and how it will be spent. The single biggest disadvantage of the cash budget is that it is not useful in identifying a firm's potential cash shortages. An advantage of the cash budget over other financial forecasting tools is its ability to reflect the precise timing and magnitudes of a firm's expected cash inflows and outflows. Assume that Dane Co. has the following accounts receivable pattern: Month of sale Month following the sale 20% 80% All sales are on credit. If sales in April and May are budgeted to be $900,000 and $1,000,000, respectively, the cash expected to be collected in May is Dane Co. purchases raw materials on account. Some of Dane's suppliers do not offer discounts and require payment the month following the purchase. Other suppliers sell on credit terms of 2/10 net 30, which means that Dane can take a 2% discount and pay 98% of the invoiced amount if the invoice is paid within 10 days. If the invoice is not paid within 30 days of making the purchase, then Dane must pay the full amount (100%) of the invoice. Dane's policy is to take advantage of available cash discounts by paying on day 10 and to make paymer discounts on day 30. At the beginning of the year, Dane's account payable balance is $70,000. All available discounts have been taken, and the balance will be paid in January. Given the following planned purchases for the next few months, determine the amount of cash that must be available each month to pay for the firm's purchases: Monthly Cash Requirement January February March Planned Purchases Discounted at 2/10 Net 30 70,000 40,000 70,000 Planned Purchases without Discounts 30,000 60,000 30,000 All sales are on credit. If sales in April and May are budgeted to be $900,000 and $1,000,000, respectively, the cash expected to be collected in May is 1,350,000 nases raw materials on account. Some of Dane's suppliers do not offer discounts and require payment the month following the 1,900,000 r suppliers sell on credit terms of 2/10 net 30, which means that Dane can take a 2% discount and pay 98% of the invoiced amount if aid within 10 days. If the invoice is not paid within 30 days of making the purchase, then Dane must pay the full amount (100%) of the 920,000 policy is to take advantage of available cash discounts by paying on day 10 and to make payments to suppliers who do not offer di 1,000,000 by 30. At the beginning of the year, Dane's account payable balance is $70,000. All available discounts have been taken, and the balance will be paid in January. Given the following planned purchases for the next few months, determine the amount of cash that must be available each month to pay for the firm's purchases: discounts on day 30. At the beginning of the year, Dane's account payable balance is $70,000. All available discounts have been taken, and th $100,000 I be paid in January. Given the following planned purchases for the next few months, determine the amount of cash that must be ava nonth to pay for $138,600 the firm's purchases: $70,000 $68,600 Month uirement January February March Planned Purchases Discounted at 2/10 Net 30 70,000 40,000 70,000 Planned Purchases without Discounts 30,000 60,000 30,000 At the beginning of the year, Dane's account payable balance is $70,000. All available discounts have been taken, and the balance will be paid in January. Given the following planned purchases for the next few months, determine the amount of cash that must be ava $100,000 honth to pay for Che firm's purchases: $39,200 Month $65,740 $69,200 uirement January February March Planned Purchases Discounted at 2/10 Net 30 70,000 40,000 70,000 Planned Purchases without Discounts 30,000 60,000 30,000 Bound on day 3U. At the beginning of the year, Dane's account payable balance is $70,000. All available discounts have been taken, and the balance will be paid in January. Given the following planned purchases for the next few months, determine the amount of cash that must be available each month to pay for the firm's purchases: $122,170 $68,600 Month $100,000 uirement Planned Purchases Discounted at 2/10 Net 30 70,000 40,000 70,000 January February March Planned Purchases without Discounts 30,000 60,000 30,000 $128,600