QUESTION: 432 Topic 8: Part 1 Sec Eight (410 to 542)

The most direct way to prepare a cash budget for a manufacturing firm into include

Projected sales, credit terms, and net income.
Projected net income, depreciation, and goodwill amortization.
Projected purchases, percentages of purchases paid, and net income.
Projected sales and purchases, percentages of collections, and terms of payments.

Answer(s): D

Explanation:

The most direct way of preparing a cash budget requires incorporation of sales projections and credit terms, collection percentages, estimated purchases and payment terms, and other cash receipts and disbursements. In other words, preparation of the cash budget requires consideration of both inflows and outflows.

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QUESTION: 433 Topic 8: Part 1 Sec Eight (410 to 542)

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RLE Corporation had income before taxes of $60,000 for the year. Included in this amount were depreciation of $5,000, a charge of $6,000 for the amortization of bond discounts, and $4,000 for interest expense. The estimated cash flow for the period is

$60000
$66,000
$49000
$71000

Answer(s): D

Explanation:

To determine cash flow for the period, all noncash expenses should be added back to net income. Adding the $5,000 of depreciation and the $6,000 of discount amortization to the $60,000 of net income produces a cash flow of $71,000.

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QUESTION: 434 Topic 8: Part 1 Sec Eight (410 to 542)

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Shown below is a forecast of sales for Cooper Inc. for the first 4 months of the year (all amounts are in thousands of dollars).

On average, 50% of credit sales are paid for in the month of sale, 30% in the month following the sale, and the remainder is paid 2 months after the month of sale. Assuming there are no bad debts1the expected cash inflows for Cooper in March is

$138,000
$122,000
$119,000
$108,000

Answer(s): C

Explanation:

Cash inflows for March would consist of 50% of March credit sales ($90 x 50% = 30% of February credit sales ($120 x 30% = $36), plus 20% of January credit sales ($100 x 20% = $20), plus sales for March of $18. Consequently, total collections equal $119,000.

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QUESTION: 435 Topic 8: Part 1 Sec Eight (410 to 542)

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A firm has daily cash receipts of $100,000 and collection time of 2 days. A bank has offered to reduce the collection time on the firm's deposits by 2 days for a monthly fee of $500. If money market rates are expected to average 6% during the year, the net annual benefit (loss) from having this service is

$3,000
$12,000
$0
$6,000

Answer(s): D

Explanation:

If collection time is 2 days, and average daily receipts are $100, 0001 the average cash balance will increase by $200,000 if the bank's system is adopted. At a 6% interest rate, $200,000 will generate $12,000 of interest revenue annually. The $500 monthly charge by the bank will result in an annual expense of $6,000. Thus1 the net annual benefit is $6,000 ($12,000 --$6,000).

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QUESTION: 432 Topic 8: Part 1 Sec Eight (410 to 542)

Explanation:

QUESTION: 433 Topic 8: Part 1 Sec Eight (410 to 542)

Explanation:

QUESTION: 434 Topic 8: Part 1 Sec Eight (410 to 542)

Explanation:

QUESTION: 435 Topic 8: Part 1 Sec Eight (410 to 542)

Explanation: