Question

1. Lindell Co. expects to purchase $20,600 of materials in July and $24,200 of materials in August. 30.00% of all purchases are paid for in the month of purchase, and the remaining 70.00% are paid for in the month following the month of purchase. What will be the company's cash disbursements in August?

		$38,620
		$23,120
		$21,680
		$27,860

2. Hamilton Industries must maintain a minimum cash balance of $37,000. At the beginning of February the company's cash balance was $66,000. The budget for February is as follows:

Total cash receipts	$220,000
Total cash disbursements	$245,000
Depreciation	$16,000

During February, how much will the company need to borrow?

		$0
		$41,000
		$25,000
		$12,000

3. Sampson Company provided the following budgeted information for the month of May:

Sales	$49,500
Direct materials cost	$24,900
Direct labor cost	$11,300
Manufacturing overhead cost	$6,400
Operating expenses	$3,200

Assuming an income tax rate of 30%, how much is budgeted net income for May?

		$3,700
		$1,110
		$2,590
		$4,830

Answer 1

Answer:

1. C - $21,680

Cash Disbursements in August

Here, 30% of all purchases are paid for in the month of purchase, and the remaining 70% are paid for in the month following the month of purchase

2. A - $0

Depreciation is a non-cash expense.

Here,company has to borrow funds only when it is not able meet cash disbursements and or not having minimum cash balance of $37,000 after considering its total cash receipts and opening balance.

The company is having a surplus balance even after meeting cash disbursements and minimum cash requirement.

Hence, there is no neccesity to borrow funds

So, funds to be borrowed is $0.

3. C - $2,590

So, Net Income is $2,590.