CMA Study Group

  • 1.  part 1 Question

    Posted 08-08-2012 05:51 AM
    hi,

    Brooke Company's management team is preparing a cash budget for the coming quarter.
    The following budgeted information is under review.

                                                   January             February           March
              Revenue                       $700,000          $800,000         $500,000
             Inventory purchases       350,000            425,000           225,000
             Other expenses              150,000            175,000            175,000

    The company expects to collect 40% of its monthly sales in the month of sale and 60% in
    the following month. 50% of inventory purchases are paid in the month of purchase, and
    50% in the following month. Payments for all other expenses are made in the month
    incurred.

    Brooke forecasts the following account balances at the beginning of the quarter

                                        Cash                                             $200,000
                                        Accounts receivable                       300,000
                                        Accounts payable (Inventory)       400,000

    Given the above information, the projected ending cash balance for February will be

    a. $712,500.
    b. $500,000.
    c. $232,500.
    d. $120,000.


    thankes


    -------------------------------------------
    Ayda Fahim Samaan
    Accountant
    Mina Tex
    Sidi Beasher
    Egypt
    -------------------------------------------


  • 2.  RE:part 1 Question

    Posted 08-08-2012 06:53 AM
    Ayda,

    Total in:  Accounts receivable 300,000 (must be 60% of december sales).
                   January sales          700,000 (receipts in jan and feb)
                   February sales(40%)320,000 (to other 60% will be received in march)  
                   Total 1,320,000

    Total out: Accounts payable   400,000 (50% procent of december purchases)
                    January purchaes   350,000 (paid in jan and feb)
                    February purch       212,500 (other 50% in march)
                    Other expenses      325,000
    Total  1,287,500

    Ending = 200,000+1,320,000-1,287,500  =232,500 (C)              
                    
     

    -------------------------------------------
    Nicolaas Johannes Breman
    Consultant
    Conquaestor
    Assendelft
    Netherlands
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    Original Message


  • 3.  RE:part 1 Question

    Posted 08-08-2012 02:23 PM
    Correct answer c. Brooke's February cash balance is $232,500.

                                           January                              February
    Opening balance            $200,000                            $ 55,000
    Accounts receivable        300,000 (Dec.)                   420,000 (700,000 x .6)
    Accounts receivable        280,000 (700,000 x .4)      320,000 (800,000 x .4)
    Accounts payable           400,000 (Dec.)                   175,000 (350,000 x .5)
    Accounts payable           175,000 (350,000 x .5)       212,500 (425,000 x .5)
    Other expense                150,000                             175,000
    Cash balance                 $ 55,000                             $232,500

    -------------------------------------------
    Patricia Abels CPA
    Academic
    The University of Findlay
    Findlay OH
    United States
    -------------------------------------------






    Original Message