When Building a Cash Budget,the Following Items Are Budgeted for the First

question 13

Multiple Choice

When building a cash budget,the following items are budgeted for the first quarter:

20% of all sales are cash sales.The remaining sales are on credit and customers have 30 days to pay.
All purchases are made on credit and paid after 2 months.
Wages are paid in the month they are incurred.
Other Expenses include depreciation at £1,000 per month.
What is the expected net cashflow in March?

• A) £1,500
• B) £6,500
• C) £4,100
• D) £3,100

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Definitions:

Accrued Interest

Interest that has been incurred but not yet paid at the end of a period.

Adjusting Entry

An accounting record made to update the financial statements to reflect transactions that have occurred but are not yet recorded.

Interest Expense

The cost incurred by an entity for borrowed funds, usually presented as an expense in the income statement.

Times Interest Earned Ratio

A metric that measures a company's ability to meet its debt obligations by comparing income before interest and taxes to interest expenses.