The Following Information Pertains to the October Operating Budget for Flockhart

question 63

Multiple Choice

The following information pertains to the October operating budget for Flockhart Corporation.
∙ Budgeted sales for October $100,000 and November $200,000.
∙ Collections for sales are 60% in the month of sale and 40% the next month.
∙ Gross margin is 30% of sales.
∙ Administrative costs are $10,000 each month.
∙ Beginning accounts receivable (October 1) $20,000.
∙ Beginning inventory (October 1) $14,000.
∙ Beginning accounts payable (October 1) $60,000. (All from inventory purchases.)
∙ Purchases are paid in full the following month.
∙ Desired ending inventory is 20% of next month's cost of goods sold (COGS) .
∙ No loans are outstanding on October 1
-For October,budgeted cash collections are:

• A)$20,000.
• B)$60,000.
• C)$80,000.
• D)None of the above is correct.

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Definitions:

Perpetual Inventory Method

A system of inventory management where updates are made continuously to account for additions to and subtractions from inventory, showing real-time inventory levels.

Partial Equity Method

An accounting method used when an investing entity holds a significant but not controlling interest in another entity, recording the investment at cost and recognizing a proportionate share of the investee's earnings.

Consolidated Entity

A group of companies that includes a parent and its subsidiaries, for which financial performance is presented in a single set of financial statements.

Book Value

The net value of a company's assets as recorded on the balance sheet, excluding intangible assets like goodwill.