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MS 3406 Short-Term Budgeting Additional Financing Needed and Forecasting

Budgeting is the process of preparing budgets, plans, schedules, and forecasts. It requires skills like forecasting, understanding cost drivers, and integrating activities. Budgets aid in resource planning and management. The master budget combines individual budgets like the profit plan. Budgets are used for planning, control, and decision making. Flexible budgets adjust for volume differences unlike static budgets. Factors to consider in forecasts include past trends, economic conditions, and competitors. Budgeting purposes include developing plans, coordinating views, allocating resources efficiently, evaluating performance, and uncovering issues.

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0% found this document useful (0 votes)
510 views7 pages

MS 3406 Short-Term Budgeting Additional Financing Needed and Forecasting

Budgeting is the process of preparing budgets, plans, schedules, and forecasts. It requires skills like forecasting, understanding cost drivers, and integrating activities. Budgets aid in resource planning and management. The master budget combines individual budgets like the profit plan. Budgets are used for planning, control, and decision making. Flexible budgets adjust for volume differences unlike static budgets. Factors to consider in forecasts include past trends, economic conditions, and competitors. Budgeting purposes include developing plans, coordinating views, allocating resources efficiently, evaluating performance, and uncovering issues.

Uploaded by

Monica Garcia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao

Since 1977

MANAGEMENT SERVICES TRINIDAD


MS 3406 – Short-term Budgeting, Additional Financing Needed and Forecasting MAY 2023

LECTURE NOTES

Budgeting is the process of preparing budgets, plans, • External forces such as weather or potential
schedules, and forecasts, and the process requires strikes
several important skills, including forecasting, a • Political or legal factors such as litigation or
knowledge of how activities affect costs, and the ability new legislation
to see how the organization's different activities fit • Pricing policies of the organization
together. • Advertising and promotion plans
• Competitors' actions
Budgets aid in determining how to acquire resources, • Potential for new product lines
and when and how these resources should be used. In • Market research studies
simple terms, a formal budgeting program is a key
ingredient to effective management. The role of Static versus Flexible Budgets
budgets includes coordination, problem signaling, and 1. Static budgets are set at the beginning of the
problem-solving activities as organization control. The period and remain constant. They are useful
plan for the coming year is called the master budget. for planning and operating purposes but can be
The master budget is known as the static budget. problematic when used for control. Control
The income statement part of the budget is called the requires the comparison of actual outcomes
profit plan. with desired outcomes. When static budgets
are used and actual sales are different from
Purposes of budgeting: budgeted sales, a comparison is inaccurate.
1. develop a plan of action. 2. Flexible budgets take differences in cost due to
2. facilitate communication of the plan and volume differences out of the analysis by
coordinate various views within an budgeting based on actual production. They
organization. can be accurately used for control purposes
3. allocate limited resources effectively and because any differences in cost caused by
efficiently. differences in volume of production have been
4. sets benchmark to control profit and removed.
operations.
5. evaluate performance and provide incentives Planning involves developing objectives and preparing
to managers. various budgets to achieve those objectives. Control is
6. provides resource information for decision the process of setting standards, receiving feedback on
making.
actual performance, and taking corrective action
7. uncovers potential bottlenecks before they
whenever actual performance deviates significantly from
occur.
8. coordinates the activities of the entire planned performance. Budgets are the standards, and
organization by integrating the plans and they are compared with actual costs and revenues to
objectives of the various parts. provide feedback.

Concepts The master budget is based on estimated sales and


1. Budgets should start with a top-down strategic production volume and is prepared before the budget
plan that guides and integrates the whole period begins. The flexible budget is based on actual
company and its individual budgets. sales and production volume and is prepared after the
2. Budgeting is a management task, not a
budget period ends.
bookkeeping task, and it requires a great deal
of planning and thoughtful input from a broad
Budget Slacks - occurs when subordinates (1) ask for
range of managers in a company.
excess resources above and beyond what they need to
3. Budgets are used throughout managers’
accomplish budget objectives and (2) distort
planning, operating, and control activities.
information by claiming they are not as efficient or
4. Budgets are future oriented and make
effective at what they do, thus lowering
extensive use of estimates and forecasts.
management's performance expectations of them.
5. Flexible budgets are based on the actual
number of units produced rather than the
Types of Budgeting
budgeted units of production.
A periodic budget is one that is prepared for a specified
6. Zero-based budgets require managers to build
period, usually one year. As each budget period
budgets from the ground up each year.
ends, the organization prepares a new budget for the
7. Although the budgets are being prepared
next one.
annually, changing expectations often require
that budgets be revised frequently. Continuous (perpetual or rolling) budgeting is a
process that plans for a specified period, usually 1
Factors to consider when developing a sales forecast. year, and organizes a budget into budget
• Past sales levels and economic trends for the subintervals, usually a month or a quarter. As each
firm as well as for the industry as a whole budget subinterval ends, the organization drops the
• General conditions in the economy such as completed subinterval from the budget and adds the
growth or decline, recession, or boom, etc. next budget subinterval. This approach stabilizes
the planning horizon at one year.

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EXCEL PROFESSIONAL SERVICES, INC.

Incremental budgeting is an approach to developing Pay suppliers in 60 days, rather than 30 days?
appropriations for discretionary expenditures that Decrease AFN: Trade creditors supply more
assumes that the starting point for each capital (i.e., L*/S0 increases).
discretionary expenditure item is the amount spent
“Percent of Sales Forecasting” vs. “Financial
on it in the previous budget.
Statement Forecasting”
Zero-Base Budgeting - requires managers to start at
• Equation method assumes a constant profit
zero budget levels every year and justify all costs as margin, a constant dividend payout, and a
if all programs were being proposed for the first constant capital structure.
time. This process differs from traditional budgeting, • Financial statement method is more flexible.
in which changes in budgets from one year to the More important, it allows different items to
next are subject to the greatest scrutiny. grow at different rates.
Authoritative budgeting occurs when superiors simply
tell subordinates what their budgets will be. STRAIGHT PROBLEMS
stretch budgeting which means that the organization
PROBLEM NO. 1.
attempts to reach much higher goals than those
The current year sales of Pinansing Company amounted
attained previously.
to P4 million. The dividend payout ratio is 20%. The
Participative budgeting involves a joint decision- percent of sales in each balance sheet item that varies
making process in which all parties agree about directly with sales are expected to be as follows:
setting budget targets. It involves the use of input Current assets 30%
from lower and middle. Net fixed assets 45%
Consultative budgeting occurs when managers ask Accounts payable & accrued expenses 25%
subordinates to discuss their ideas but no joint Net profit rate 15%
decision making occurs.
Requirements:
Financial forecasting is looking ahead to develop a 1. Suppose that next year sales are expected to
financial plan for the future. It is very important for the increase by 25% percent. How much additional
strategic growth of a firm. (external) capital will be required?
2. What would happen to capital requirements if Alas
Pattern in Financial Planning can increase its sales by 50% and the payout ratio
is maintained.
• Forecasting sales 3. What would happen to additional capital
• Projecting the assets and internally generated requirement if the payout ratio is raised to 40% and
funds there was an increase in sales by 25%?
• Projecting outside funds needed 4. Compute the sustainable growth rate.
• Deciding how to raise funds
PROBLEM NO. 2.
Percentage of sales forecasting method is a simple but Ey-ef-en Company’s sales are forecasted to increase
practical procedure for forecasting financial statement from P1M this year to P2M next year. Hereunder is
variables (The “quick and dirty” approach). The the balance sheet in the current year:
procedures are based on two assumptions: (a) that all
variables are tied directly with sales; and, (b) that the Cash P 100,000
current levels of most balance sheet items are optimal Accounts receivable 200,000
for the current sales level. Inventories 200,000
Steps: Net fixed assets 500,000
1. Identify assets and liabilities that will vary Total assets P1,000,000
spontaneously with sales.
2. Estimate the amount of net income that will be Accounts payable P 50,000
retained. Notes payable 150,000
3. Compute the amount of External Financing Needed Accruals 50,000
(EFN) by subtracting increase in spontaneous Long-term debt 400,000
liabilities and income retained from increase in total Common stock 100,000
financing required (increase in assets due to increase Retained earnings 250,000
in sales). Total Liabilities & Equity P1,000,000

AFN = S x (SA/So) - S x (SL/So) – (ROS x 1 - Payout Ey-ef-en’s fixed assets were used to only 50 percent of
% x S1) capacity during the current year, buts its current assets
Where: SA/S0 = percentage relationship of were at their proper levels. All assets except fixed
spontaneous assets (variable assets) to sales at period assets increase at the same rate as sales, and fixed
zero. assets would also increase at the same rate if the current
SL/S0 = percentage relationship of spontaneous excess capacity did not exist. Heart’s after-tax profit
liabilities (variable liabilities) to sales at period 0 margin is forecasted to be 5 percent, and its payout ratio
will be 60 percent. What is Heart’s additional funds
Variables that affect the AFN needed for the coming year?
Higher dividend payout ratio? Increase AFN: Less
retained earnings. PROBLEM NO. 3.
Higher profit margin? Decrease AFN: Higher What is the forecast for July based on a three-month
profits, more retained earnings. weighted moving average applied to the following past
Higher capital intensity ratio? Increase AFN: Need demand data and using the weights: 4, 3 and 3 (largest
more assets for given sales. weight is for most recent data)? Show all of your
computations for April through July.

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EXCEL PROFESSIONAL SERVICES, INC.

Month Demand Forecast May 510,000


January 40,000 June 540,000
July 525,000
February 45,000
In addition, the gross profit rate is 30% and the
March 57,000 desired inventory level is 25% of next month's cost of
April 60,000 sales.
May 75,000
June 87,000 Requirement: Prepare a purchase budget for April and
July May.

PROBLEM NO. 4. PROBLEM NO. 8.


Actual sales for January through April are shown below. Coyote Loco, Inc., a manufacturer of salsa, has the
Observation Month Actual Sales Forecast following historical collection pattern for its credit sales:
70 percent collected in the month of sale, 15 percent
1 January 18,000
collected in the first month after sale, 10 percent
2 February 23,000 collected in the second month after sale, 4 percent
3 March 20,000 collected in the third month after sale and 1 percent
4 April 16,000 uncollectible. The sales on account have been budgeted
5 May for the last seven months of the year as follows:
June P490,000 October 700,000
Use exponential smoothing with α = 0.2 to calculate July 900,000 November 850,000
smoothed averages and forecast sales for May from the August 600,000 December 800,000
above data. Assume the forecast for the initial period September 1,000,000
(January) is 18,000.
Requirements:
PROBLEM NO. 5. 1. Compute the estimated total cash collections during
Purestar Company is developing its budgets for the October from credit sales during the year.
coming year and, for the first time, will use the kaizen 2. Compute the estimated total cash collections during
approach. The initial budgeted income statement for the the fourth quarter from sales made on account
coming year, based on static data from last year4, is as during the fourth quarter.
follows: 3. Compute the estimated total cash collections during
Sales (140,000 units) P420,000 the fourth quarter from sales made on account
Less: Cost of goods sold 280,000 during the year.
Gross margin 140,000
Operating expenses (includes PROBLEM NO. 9.
P28,000 depreciation) 112,000 Private Army Company has made the following sales
Net income P28,000 projections for the next six months. All sales are credit
Selling prices for the coming year are expected to sales.
increase by 8%, and sales volume in units will March P2,400,000 June P2,800,000
decrease by 10%. The cost of goods sold as April 3,000,000 July 3,500,000
estimated by the kaizen approach will decline by 10% May 1,800,000 August 3,800,000
per unit. Other than depreciation, all other operating Sales in January and February were P2,700,000 and
costs are expected to decline by 5%. P2,600,000, respectively. Experience has shown that of
total sales, 10 percent are uncollectible, 30 percent are
Requirements: Prepare a kaizen-based budgeted income collected in the month of sale, 40 percent are collected
statement for the coming year. in the following month, and 20 percent are collected two
months after sale.
PROBLEM NO. 6.
Budjetari Company plans to sell 40,000 units of finished Requirement:
product in July. Management (1) anticipates a growth Of the sales expected to be made during the six months
rate in sales of 5% per month thereafter and (2) desires from March through August, how much will still be
a monthly ending finished-goods inventory (in units) of uncollected at the end of August? How much of this is
80% of the following month's estimated sales. There are expected to be collected later?
30,000 completed units in the June 30 inventory.
PROBLEM NO. 10.
Each unit of finished product requires three pounds of Batangas Manufacturing has a cash balance of
direct material at a cost of P7.50 per pound. There are P26,000 on August 1 of the current year. The
160,000 pounds of direct material in inventory on June company's controller forecast the following cash
30. The company’s policy is to keep 60 percent of the receipts and cash disbursements for the upcoming two
month’s materials usage on hand at the beginning of the months of activity:
month. Cash Receipts Cash Payments
August P450,000 P580,000
Requirements: September 640,000 560,000
1. Prepare a monthly production budget for the Management desires to maintain a minimum cash
quarter ended September 30. balance of P25,000 at all times. If necessary, additional
2. Prepare a budget for materials purchases. financing can be obtained in P10,000 multiples at a 15%
interest rate. All borrowings are made at the beginning
PROBLEM NO. 7. of the month; debt retirement, on the other hand, occurs
Tarlac Company has the following information: at the end of the month. Interest is paid at the time of
Month Budgeted Sales repaying loan principal and is computed on the portion of
March P500,000 debt repaid.
April 530,000

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EXCEL PROFESSIONAL SERVICES, INC.

Requirement: Determine the ending cash balance in one of the following is not a significant reason for
August and September both before and after any planning?
necessary financing or debt retirement. a. Providing a basis for controlling operations.
b. Forcing managers to consider expected future
PROBLEM NO. 11. trends and conditions.
NE Enterprises reported the following cash collections in c. Ensuring profitable operations.
July and August from credit sales: d. Checking progress toward the objectives of the
July August organization.
June receivables P33,000
July sales 105,000 P45,000 6. When developing a budget, an external factor to
August sales 168,000 consider in the planning process is
The company sells a single product for P20, and all sales a. A change to a decentralized management
are collected over a two-month period. system.
b. New product development.
Requirements: c. The implementation of a new bonus program.
1. Determine the number of units that were sold in d. The merger of two competitors.
July.
2. Determine the percent of credit sales collected in 7. A firm develops an annual cash budget in order to
the month of sale and the percent of sales a. Support the preparation of its cash flow
collected in the month following sale. statement for the annual report.
3. How many units were sold in August? b. Ascertain which capital expenditure projects
4. Determine the accounts receivable balance as of are feasible and which capital expenditure
August 31. projects should be deferred.
c. Determine the opportunity costs of alternative
sales and production strategies.
MULTIPLE CHOICE QUESTIONS d. Avoid the opportunity costs of noninvested
excess cash and minimize the cost of interim
1. Which of the following represents a general financing.
framework for guiding management’s operating
decisions containing projected activity levels for 8. The primary reason why managers impose a
the next year? minimum cash balance in the cash budget is
a. organizational goals implementation plan. a. because management needs discretionary cash
b. strategic long-range profit plan. for unforeseen business opportunities.
c. master budget. b. managers lack discipline to control their
d. none of the above. spending.
c. that it protects the organization from the
2. Which of the following is not a benefit of uncertainty of the budgeting process.
participative or grassroots budgeting? d. that it makes the financial statements look
a. The process of participative budgeting can be more appealing to creditors.
time consuming.
b. Participating budgeting enhances employee 9. The major feature of zero-based budgeting is that
motivation and acceptance of goals. it
c. Patricipative budgeting provides information a. Takes the previous year’s budgets and adjusts
that enables employees to associate rewards them for inflation.
and penalties with performance. b. Questions each activity and determines
d. Participative budgeting yields information that whether it should be maintained as it is,
employees know but managers do not know. reduced, or eliminated.
c. Assumes all activities are legitimate and
3. Budget slack occurs when: worthy of receiving budget increases to cover
a. employees refuse to abide by the budget. any increased costs.
b. the budget is so difficult to meet that employees d. Focuses on planned capital outlays for
slack off from work. property, plant and equipment.
c. employees ask for resources in excess of what
they need to meet budget objectives. 10. The budget that is usually the most difficult to
d. employees ask for fewer resources than they forecast is the
need to meet budget objectives. a. Cash budget
b. Manufacturing overhead budget
4. A continuous budget: c. Expense budget
a. drops the current month or quarter and adds a d. Sales budget
future month or a future quarter as the current
month or quarter is completed. 11. Which of the following represents the normal
b. presents a statement of expectations for a period sequence in which the indicated budgets are
but does not present a firm commitment. prepared?
c. presents the plan for only one level of activity a. Direct Materials, Cash, Sales
and does not adjust to changes in the level of b. Production, Cash, Income Statement
activity. c. Sales, Balance Sheet, Direct Labor
d. presents the plan for a range of activity so that d. Production, Manufacturing Overhead, Sales
the plan can be adjusted for changes in activity.
12. Which of the following statements is true?
5. Each organization plans and budgets its A. All organizations have the same set of budgets.
operations for slightly different reasons. Which B. All organizations are required to budget.
C. Budgets are a quantitative expression of an

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EXCEL PROFESSIONAL SERVICES, INC.

organization's goals and objectives. Revenue P2,400,000


D. Budgets should never be used to evaluate Cost of goods sold
performance. Direct materials 675,000
Direct labor 300,000
13. Of the following budgets, which one is least likely Variable overhead 450,000
to be determined by the dictates of top Contribution margin P 975,000
management? Fixed overhead 250,000
A. Sales Fixed selling & adm. 500,000
B. Material usage Operating income P 225,000
C. Revenues
D. General and administrative Actual sales during May were 180,000 video
cards. Using a flexible budget, the company
14. Which of the following statements is not correct? expects the operating income for the month of
A. The sales budget is the starting point in May to be
preparing the master budget. a. P225,000 c. P420,000
B. The sales budget is constructed by multiplying b. P270,000 d. P510,000
the expected sales in units by the sales price.
C. The sales budget generally is accompanied by a 19. The operating results in summarized form for a
computation of expected cash receipts for the retail computer store for the year then ended are
forthcoming budget period. Revenue
D. The cash budget must be prepared prior to the Hardware sales P4,800,000
sales budget since managers want to know the Software sales 2,000,000
expected cash collections on sales made to Maintenance contracts 1,200,000
customers in prior periods before projecting sales Total revenue P8,000,000
for the current period. Costs and expenses
Cost of hardware sales P3,360,000
15. Ball Company has a policy of maintaining an Cost of software sales 1,200,000
inventory of finished goods equal to 30 percent of Marketing expenses 600,000
the following month's sales. For the forthcoming Customer maintenance costs 640,000
month of March, Ball has budgeted the beginning Administration expenses 1,120,000
inventory at 30,000 units and the ending Total costs and expenses P6,920,000
inventory at 33,000 units. This suggests that Operating income P1,080,000
a. February sales are budgeted at 10,000 units The computer store is in the process of formulating
less than March sales. its operating budget for next year and has made the
b. March sales are budgeted at 10,000 units less following assumptions:
than April sales. • The selling prices of hardware are expected to
c. February sales are budgeted at 3,000 units increase 10% but selling prices will not increase
less than March sales. for software or maintenance contracts.
d. March sales are budgeted at 3,000 units less • Hardware unit sales are expected to increase 5%
than April sales. with a corresponding 5% growth in the number
of maintenance contracts; growth in units
16. Adriano Company is developing its budgeted cost software sales is estimated at 8%.
of goods sold for next year. Adriano has • The cost of hardware and software is expected to
developed the following range of sales estimates increase 4%.
and their corresponding probabilities for the year. • Marketing expenses will be increased 5% in the
Sales Estimates Probability coming year.
P1,500,000 25% • Three technicians will be added to the customer
P1,800,000 45% maintenance operations in the coming year,
P2,400,000 30% increasing the customer maintenance costs by
P120,000.
Adriano Company’s cost of goods sold averages • Administrative costs will be held at the same
75% of sales. What is the expected cost of goods level.
sold? The retail computer store’s budgeted total
a. P1,905,000 c. P1,428,750 revenue for next year would be
b. P 1,900,000 d. P1,425,000 A. P8,804,000
B. P8,460,000
17. Reid Co. makes payments for purchases 10% C. P8,904,000
during the month of purchase, 60% in the D. P8,964,000
following month, and the remainder in the second
month following the purchase. Purchases are 20. Next month’s budgeted sales for TEMP is 18,000
projected to be P130,000 in January, P140,000 in units. Each unit of product TEMP uses 6
February, and P160,000 in March. The March 31 kilograms of raw materials. The production and
accounts payable balance will be inventory budgets for June are as follows:
a. P48,000. c. P144,000.
Opening Planned
b. P96,000. d. P186,000. Inventory Ending
Inventory
18. Bebe Corporation expected to sell 150,000 video
Raw materials 21,000 kgs. 24,400 kgs.
cards during the month of May, and the
Finished goods 15,000 units 11,400 units
company’s master budget contained the following
data related to the sale and production of these During the production process, it is usually found
games: that 10% of production units are scrapped as
defective and this loss occurs after the raw

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EXCEL PROFESSIONAL SERVICES, INC.

materials have been placed in process. A. P598,125 C. P748,125


What will the raw material purchases be in June? B. P733,125 D. P808,125
A. 89,800 kgs.
B. 96,000 kgs. 25. Purple's Pharmaceutical Delivery Company is a
C. 98,440 kgs. high-volume business that features home delivery
D. 99,400 kgs. services to elderly shut-ins. Located in Makati
City, the company currently uses six delivery
21. Marple Company's budgeted production in units trucks to service the area within a 100-mile
and budgeted raw materials purchases over the radius of the metropolis and suburbs. Each
next three months 1are given below: delivery truck can make a maximum of 600
January February March deliveries per month. In June, the demand for
Budgeted production (in these deliveries totaled 3,200, and the company
units) 60,000 ? 100,000 has been experiencing a 2 percent increase in
Budgeted raw materials demand, compounded monthly. In which month
purchases (in pounds) 129,000 165,000 188,000 must the company add a seventh delivery truck,
Two pounds of raw materials are required to given these estimates?
produce one unit of product. The company wants a. August c. February of next year
raw materials on hand at the end of each month b. October d. December
equal to 30% of the following month's production
needs. The company is expected to have 36,000 Use the following information for the next three
pounds of raw materials on hand on January 1. questions.
Budgeted production for February should be: Carter Lumber sells lumber and general building
A. 105,000 units. supplies to building contractors in a medium-sized
B. 82,500 units. town in Laguna. Data regarding the store's operations
C. 150,000 units. follow:
D. 75,000 units. Sales are budgeted at P380,000 for November,
P390,000 for December, and P400,000 for January.
22. Each unit of product ZIM takes five direct labor Collections are expected to be 70% in the month of
hours to make. Quality standards are high and sale, 27% in the month following the sale, and 3%
8% of units produced are normally rejected due uncollectible.
to substandard quality. Next month’s budgets are
as follows: The cost of goods sold is 65% of sales. The company
purchases 80% of its merchandise in the month prior
Beginning inventory of finished goods 3,000 units
to the month of sale and 20% in the month of sale.
Planned ending inventory of finished goods 7,600 units
Payment for merchandise is made in the month
Budgeted sales of ZIM 36,800 units
following the purchase.
All stocks of finished goods must have successfully
passed the quality control check. What is the direct Other monthly expenses to be paid in cash are
labor budget for the month? P22,000. Monthly depreciation is P20,000. Ignore
A. 198,720 hours taxes.
B. 200,000 hours Statement of Financial Position
C. 223,500 hours October 31
D. 225,000 hours Assets
Cash P13,000
23. Harrison Company has budgeted its operations for Accounts receivable (net of allowance
August. No change in the inventory level during for uncollectible accounts) 77,000
the month is planned. Selected data based on Inventory 197,600
estimated amounts are as follows: Property, plant and equipment (net of
Net loss P(120,000) P502,000 accumulated depreciation) 992,000
Increase in accounts payable 48,000 Total assets P1,279,600
Depreciation expense 42,000
Decrease in gross amounts of trade Liabilities and Stockholders’ Equity
account receivables 72,000 Accounts payable P240,000
Purchase of equipment on 90-day credit Common stock 780,000
terms 18,000 Retained earnings 259,600
Provision for estimated warranty liability 12,000 Total liabilities and stockholders’
What is the expected change in the cash position equity P1,279,600
during August?
A. P18,000 decrease. C. P36,000 increase. 26. The net income for December would be:
B. P30,000 decrease. D. P54,000 increase. a. P114,500 c. P101,400
b. P94,500 d. P82,800
24. The January budget of Balagtas Company is being
prepared by the budget officer of the company. 27. The cash balance at the end of December would
In the preparation of the cash budget the be:
estimates for the month of January include the a. P182,400 c. P13,000
following: b. P114,400 d. P195,400
Sales P937,500
Gross profit (based on sales) 25% 28. The accounts receivable balance, net of
Increase in inventories P75,000 uncollectible accounts, at the end of December
Decrease in trade accounts payable P30,000 would be:
The estimated cash disbursements for inventories in a. P105,300 c. P117,000
January is b P88,700 d. P207,900

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EXCEL PROFESSIONAL SERVICES, INC.

Use the following information for the next two questions. 30. The cost of goods sold for the month of June is
Sloan Company, a wholesaler, budgeted the following anticipated to be
sales for the indicated months: A. P2,232,000. C. P2,356,000.
June July August B. P2,325,000. D. P2,475,000.
Sales on account P2,790,000 P2,860,000 P2,980,000
Cash sales 180,000 200,000 260,000
Total sales P2,970,000 P3,060,000 P3,240,000
All merchandise is marked up to sell at its invoice cost
plus 20%. Merchandise inventories at the beginning of
each month are at 30% of that month's projected cost of
goods sold.
29. Merchandise purchases for July are anticipated to
be
A. P2,448,000.
B. P3,114,000.
C. P2,550,000.
D. P2,595,000.

“Excellence is not an act, but a Habit.” –Aristotle

– end -

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