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# Purchase Budget

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25 multiplequestions on accounting such as:

Which of the following is increased with a debit?
A) Consulting Revenue
B) Depreciation Expense
C) Notes Payable
D) Common Stock

https://brainmass.com/economics/personal-finance-savings/purchase-budget-234272

#### Solution Preview

1.
What effect will the following entry have on Retained Earnings?

A) Retained Earnings will increase by \$9,150.
B) Retained Earnings will decrease by \$9,150.
C) Retained Earnings will remain unchanged.
D) Retained Earnings will be transferred to the income statement.

A) Retained Earnings will increase by \$9,150.

2.
On January 1, 2007, Shaffer Co. purchased inventory for \$1,000 cash. These goods were sold on April 30, 2007 for \$1,400 cash. The company can currently earn 3% interest on an account at a bank. What was Shaffer's cost of financing this inventory?
A) \$10
B) \$0
C) \$30
D) \$400

A) \$10
Cost of financing= Principle*rate * time
=1000*3%*4/12
=\$10

3.
Sine Company borrowed \$20,000 on October 1, 2007 when the company issued a one-year note with a 6% annual interest rate. The adjusting entry necessary to record accrued interest on December 31, 2007 would include a:
A) debit to Interest Expense for \$1,200.
B) debit to Interest Payable for \$1,200.
C) debit to Notes Payable for \$300.
D) debit to Interest Expense for \$300.

D) debit to Interest Expense for \$300.

Interest for 3 months= Principle*Interest*Time
=20000*6%*3/12
=\$300

4.
George Co. had beginning inventory of \$400 and ending inventory of \$200. The cost of goods sold was \$1,600. Based on this information, George Co. must have purchased inventory amounting to:
A) \$1,400.
B) \$1,600.
C) \$1,800.
D) \$2,200

Purchase= COGS+Ending-Opening
=1600+ 200-400
=\$1400
A) \$1400

5.

What effect will the return of merchandise to the supplier have on the accounting equation?

A) Assets and equity are reduced by \$600.
B) Assets ...

#### Solution Summary

Response provides the steps to compute the Purchase amount

\$2.19

## Master Budget with Supporting Schedules 2 schedules incomplete

The cash budget is composed of four major sections:
1. The receipts section.
2. The disbursements section
3. The cash excess or deficiency section.
4. The financing section.
The receipts section lists all of the cash inflows, except from financing, expected during the budget period. Generally, the major source of receipts is from sales.
The disbursements section summarizes all cash payments that are planned for the budget period. These payments include raw materials purchases, direct labor payments, manufacturing overhead costs, and so on, as contained in their respective budgets. In addition, other cash disbursements such as equipment purchases and dividends are listed.

My cash excess section was computed as follows:

If a cash deficiency exists during any budget period, the company will need to borrow funds. If there is a cash excess during any budget period, funds borrowed in previous periods can be repaid or the excess funds can be invested.
The financing section details the borrowings and repayments projected to take place during the budget period. It also lists interest payments that will be due on money borrowed.

The cash balances at both the beginning and end of the year may be adequate even though a serious cash deficit occurs at some point during the year. Consequently, the cash budget should be broken down into time periods that are short enough to capture major fluctuations in cash balances.

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