Sales Are Budgeted By Rodriguez Company Case Study

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Register to read the introduction… normally has a debit balance.

19. The financial statements of the Bolton Manufacturing Company reports net sales of $500,000 and accounts receivable of $50,000 and $30,000 at the beginning of the year and end of year, respectively. What is the receivables turnover ratio for Bolton? a. 7 times b. 10 times c. 16.7 times d. 12.5 times

20. The following credit sales are budgeted by Rodriguez Company:

February 50,000 March 70,000 April 60,000

The company’s past experience indicates that 80% of the accounts receivable are collected in the month of sale, 20% in the month following the sale. The anticipated cash inflow for the month of April is a. $48,000. b. $56,000. c. $60,000. d. $62,000.

PART II — TRUE/FALSE 3 points each (39 points)

1. Under an operating lease, both the leased asset and the liability are shown on the balance sheet.

2. Certain types of leases, called capital leases, allow the lessee to account for the transaction as a rental.

3. The issuance of common stock affects both paid-in capital and retained
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Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.

7. Another name for horizontal analysis is trend analysis.

8. If a company has sales of $110 in 2007 and $154 in 2006, the percentage decrease in sales from 2006 to 2007 is 140%.

9. Allowance for Doubtful Accounts is debited under the direct write-off method when an account is determined to be uncollectible.

10. When the allowance method is used, the write-off of an account receivable results in an expense at the time of write-off.

11. Allowance for Doubtful Accounts is a contra account that is deducted from Accounts Receivable on the balance sheet.

12. The Allowance for Doubtful Accounts is a liability account.

13. When a monthly mortgage payment is made and recorded, the debit to Mortgage Payable represents the reduction in the principal balance.

PART III — MATCHING 3 points each (42 points)

Match the items below by entering the appropriate code letter in the space provided.

A. Prenumbered documents G. Cash budget B. Custody of an asset should be kept H. Restricted

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