No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

OPERATIONS AND FINANCIAL BUDGETING

BUDGETING – the process of developing a formal written statement of the management plans for the
future, expressed in financial terms.

BUDGETS – a formal plan expressed in financial terms, which documents the allocation of funds across
the different departments of the company.

PURPOSE OF BUDGETING
1. Planning
2. Facilitate communication
3. Encourage coordination of all departments
4. Provide incentives
5. Control of operations
6. Performance evaluations
7. Satisfy legal and contractual requirements

ESSENTIAL ATTRIBUTES OF AN EFFECTIVE BUDGETING PROCESS

1. Predictive ability
2. Better communication
3. Reliable and timely information
4. Understandability of information
5. Support at all levels of the organization

LIMITATIONS OF BUDGETING
1. Only estimates not statements of facts
2. No substitute for sound management practices
3. Regular amendment is necessary
4. Does not guarantee success
5. People’s behavior may undermine the value of the process

BUDGETARY PROCESS
1. Setting the objectives
2. Analyzing the available resources of company
3. Negotiating to estimate budget components
4. Coordinating and reviewing budget components
5. Obtaining the final approval
6. Distribution of the approved budget
TYPES OF BUDGETS

As to Scope

Master Budget – represents the overall plan of the organization for the forthcoming fiscal year. It consists
of all the individual budgets for each of the segment of the organization aggregated or consolidated into
one overall budget for the entire firm.

Operations Budget - budget prepare for activities affecting the company’s revenue and expenses.

Financial Budget – the budget which examines the planned level of the assets, liabilities and equity of
the company.

Capital Budget – Involves long term projects for fixed assets acquisition
As to Flexibility

Fixed (Static) Budget – based on only one level of activity or production. It is used when a company is
relatively stable.

Flexible (Variable, Dynamic) Budget – a series of budgets prepared for various levels of activity. It
allows variability in the business and for unexpected changes

As to the Basis of the Budget

Continuous (Rolling) Budget – one that is revised on a regular (continuous) basis; typically, the budget
is extended for another month or quarter in accordance with new data as the current month or quarter
ends.

Zero-base Budgeting – a budget and planning process in which each manager must justify a
department’s entire budget from a base of zero every period; all expenditures must be justified regardless
of the variance from the previous periods; the objective is to encourage periodic re-examination of all
costs in the hope that some can be reduced or eliminated.

Kaizen Budgeting – incorporates expectations for continuous improvement into budgetary estimates.

As to the Activities or Value Chain

Life-cycle Budget – estimates a product’s revenues and expenses over its entire life cycle in the value
chain.

Activity-based Budgeting – applies activity-based costing principles to budgeting.

PROBLEM 1
The Sales Department of Dot Was Shoe Hat Co. is currently preparing the sales budget for the coming
year 2023. Details of the estimated sales in units are as follows:

First quarter 1,050 units

Second quarter 1,120 units
Third quarter 1,040 units
Fourth quarter 1,100 units
First quarter – 2024 1,020 units

Current budgeting policy estimates the following ending inventories that would satisfy the volume
requirements of the upcoming year:

Finished Goods: 15% of the current quarter’s sales

Raw Materials: 25% of the following quarter’s volume requirements

Furthermore, the company’s financial statements as of December 31, 2022 show the following ending
balances:

Finished goods 200 units 8,000

Raw materials 500 units 4,000
Total 12,000

Any work in process is considered negligible. The company follows a 2:1 ratio between its raw materials
and finished goods inventory, respectively. There is no significant change in the cost of production input.

REQUIRED: Determine the following

1. Production in units for the first quarter
2. Production in units for the second half of 2023
3. Cost of raw materials purchase for the second quarter
4. Direct materials used in units for the first half of 2023

PROBLEM 2
The sale and inventory budgets of SNF Incorporated for December 2024 are as follows:

Beginning Inventory Planned ending Sales

inventory
Finished goods (in units) 10,000 7,600 12,000
Raw materials (in kg) 14,000 48,000 -

During the production process, it is usually found that 10% of the good units are scrapped as defective
and this loss occurs after the raw materials have been placed in process. Each unit of finished product
uses 5 kilograms of raw materials.

REQUIRED: Determine the following:

1. Production in units during the period
2. Spoiled units during the period
3. Raw materials used in kg
4. Raw materials purchase in kg
PROBLEM 3
Yumi’s Mabuddy Incorporated buys and sells jackets. Estimated sales for the next four months are:

May P50,000
June 40,000
July 60,000
August 90,000

Sales for April were P45,000. All sales are on account. The company estimates that 60% of the accounts
receivable are collected in the month of sale with the remaining 40% collected the following month. The
units sell for P10 each. The cash balance for May 1 is P20,000.

Generally, 40% of purchases are due and payable in the month of purchase with the remainder due the
following month. Purchase cost per unit is P4. The company maintains an end-of-the-month inventory of
1,000 units plus 20% of next month’s unit sales.

REQUIRED: Determine the following:

1. Cash receipts during May
2. Cash disbursement during July
3. Estimated cash balance as at June 30

PROBLEM 4
The following information pertains to the expected sales and purchases of MRAJ Incorporated for the
year 2024:

Quarter Credit Sales Purchases

First P200,000 $150,000
Second 275,000 125,000
Third 230,000 155,000
Fourth 260,000 145,000
First - 2025 340,000 175,000

Cash is collected from customers in the following manner:

 30% - month of sale (subject to 10% cash discount)

 50% - month following sale
 40% - two months after the month of sale
 10% - uncollectible

60% of purchases are paid for in cash in the month of purchase, and the balance is paid the following
month.

REQUIRED: Determine the following:

1. Cash receipts for the second quarter of 2024
2. Cash disbursement for the third quarter of 2024
3. Net cash flows in the fourth quarter of 2024
PROBLEM 5
Natlan Incorporated is an independently owned major retail store chain in the Metro Manila. Rapid
expansion has created the need for careful planning of the cash requirements to ensure that the chain is
able to replenish stock adequately and meet payment schedules to creditors. Mavuika, the founder of the
company, has established a banking relationship that provides a P200,000 line of credit to Natlan Inc.
The bank requires that a minimum balance of P8,200 be kept in the checking account at the end of each
month. When the balance goes below P8,200 the bank automatically extends the line of credit in
multiples of P1,000 so that the checking account balance is at least P8,200 at month-end.

Natlan, attempts to borrow as little as possible and repays the loans quickly in multiples of P1,000 plus 2
percent monthly interest on the balance outstanding. Interest payments and any principal payments are
paid at the end of the month following the loan. The company currently has no outstanding loans

Mavuika showed the following draft cash budget schedules in the special meeting called by the board of
directors, they would like to ask for your opinion on how to complete the necessary data:

January February March

Cash balance, beginning P8,800 ? ?
Cash receipts 145,200 155,340 178,080
Cash disbursements (before loan and interests 154,400 149,640 170,160
payment)
Cash balance, ending ? ? ?

REQUIRED: Determine the following:

1. Cash balance at the end of January
2. Cash balance at the end of February
3. Cash balance at the end of March
MULTIPLE CHOICE: Select the best answer from the choices provided. Sources: AICPA/RPCPA/CMA
and Various Test banks

1. Budgets must be congruent with what?

a. The organization’s internal environmental factors
b. The organization’s external environmental factors
c. The organization’s strategic plan and long-term strategic goals
d. The organization’s performance evaluation and incentive compensation factors

2. The correct sequence in a typical budgeting process shall be:

a. Materials budget, production budget, sales budget
b. Production budget, sales budget, materials budget
c. Sales budget, materials budget, production budget
d. Sales budget, production budget, materials budget

3. Which of the following specific budgets is the key driving force of the overall operational budget?
a. The capital projects budget c. The production budget
b. The pro forma income statement d. The sales budget

4. Karate Chop Company predicts sales of 40,000 units in Q1 at P 5.00 per unit. Karate Chop predicts
that unit sales will grow by 4% each quarter and that selling price will increase by 5% each quarter.
Each unit costs P 3.00 to produce in Q1. Costs are expected to grow by 3% each quarter. Using a
quarterly sales budget, sales revenue for the year will be closest to:
a. P 169,859 c. P 800,000
b. P 383,598 d. P 917,327

5. Wash Sy wishes to prepare a budget that will enable her to compare the amount actually spent to
service 20,000 clients with the amount that should have been spent to service 20,000 clients. Which
budgeting system would be the most appropriate system for Wash Sy to use?
a. A master budgeting system
b. A flexible budgeting system
c. A zero-based budgeting system
d. A continuous or rolling budgeting system

6. In relation to comprehensive budgeting, which of the following statements is incorrect?

a. Rolling budget is a budget that is revised on a regular (continuous) basis.
b. The budget committee do not prepare and develop budgets. They only approve it because
the preparation of budgets rests with individual managers.
c. The information on budgeted balance sheet does not contain information for the current
budget only but rather it has cumulative information like a usual balance sheet of a set of
financial statements.
d. None from the statements is incorrect.

7. Using the concept of ‘expected value” in sales forecasting means that the sales forecast to be used is
a. developed using the indicator method
b. the sum of the sales expected by individual managers
c. based on expected selling prices of the products
d. based on probabilities

8. Several sales forecasts are available from different sources and the managers have good ideas about
their likelihoods. This situation call for the use of
a. the expected value concept
b. indicator methods
c. historical analysis
d. a scatter diagram
9. Recognition of the many uncertainties in budgeting is exemplified by companies normally
a. forecasting sales
b. establishing minimum required cash balances
c. forecasting only fixed costs
d. omitting expected dividend payments from budgeted disbursements

10. Which of the following statements is True?

a. Under zero-based budgeting, a manager is required to start at zero budget levels each period, as
if the programs involved were being initiated for the first time.
b. The primary purpose of the cash budget is to show the expected cash balance at the end of the
budget period.
c. Budget data are generally prepared by top management and distributed downward in an
organization.
d. The budget committee is responsible for preparing detailed budget figures in an organization.

11. Budgets are a necessary component of financial decision making because they provide a(n)
a. Efficient allocation of resources
b. Means to use all the firm’s resources
c. Means to check managerial discretion
d. Automatic corrective mechanism for errors

12. In an organization that plans by using comprehensive budgeting, the master budget is
a. The booklet containing budget guidelines, policies and forms to use in the budgeting process
b. The current budget updated for operations for part of the current year
c. A compilation of all the separate operational and financial budget schedules of the organization
d. A budget for a non-profit entity after it is approved by the appropriate authoritative body

13. The budgeting process should be one that motivates managers and employees to work toward
organizational goals. Which one of the following is LEAST likely to motivate managers?
a. Participation by subordinates in the budgetary process
b. Use of management by exception
c. Holding subordinates accountable for the items they control
d. Having top management set budget levels

14. Which of the following is not a potential problem with participative budgeting?
a. setting standards that are either too high or too low
b. padding the budget
c. build slack into the budget
d. all of the above are potential problems

15. The ideal financial planning process would be

a. top-down planning.
b. bottom-up planning.
c. a combination of top-down and bottom-up planning.
d. None of the above

16. In estimating the sales volume for a master budget, which of the following techniques may be used to
improve the projections?
a. Brainstorming.
b. Statistical analysis.
c. Estimating from previous sales volume.
d. All of these are useful.
17. Comparing actual results with a budget based on achieved (actual) volume is possible with the use of
a
a. Monthly budget
b. Rolling budget
c. Master budget
d. Flexible budget

18. Which one of the following budgeting methodologies would be most appropriate for a firm facing a
significant level of uncertainty in unit sales volumes net year?
a. Static budgeting
b. Top-down budgeting
c. Flexible budgeting
d. Life-cycle budgeting

19. “Kaizen” budgeting refers to the budgeting process where

a. A products revenues and expenses are estimated over its entire life cycle (i.e., from R&D phase
to customer support phase)
b. The budget is based on many levels of activity so that the budget may be adjusted based on
actual activity
c. The budget is based on only one level of activity
d. The budget is based not on the existing system, but on changes or improvements that are to be
made

20. A company that uses zero-based budgeting has

a. An expense budget of zero
b. Zero as the starting point of budgeting the coming year’s expenses
c. A zero variance between budgeted and actual performance
d. An assumed sales level of zero

21. A plan expressed in financial terms, on how to acquire and use the resources of an entity?
a. Production report
b. Management report
c. Budget
d. Performance report

22. It is the group of people which usually composed of the sales manager, production manager, chief
engineer, treasurer, and controller involved in the budgetary process
a. Audit committee
b. Executive committee
c. Budget committee
d. Risk Management committee

23. All the following represents a use of allowance or budgetary slack in the budget, except
a. Allow flexibility for unexpected circumstances
b. Project actual expenses
c. Use the budget to control subordinate performance
d. Increase the probability of achieving the budgeted performance

24. Which of the following planning approaches will promote better management support or acceptance
of the budget?
a. Top-down approach
b. Bottom-up approach
c. Zero-based approach
d. Accounting approach
25. Which of the following planning approaches is commonly used in long range planning and is
centralized to top management?
a. Top-down approach
b. Bottom-up approach
c. Zero-based approach
d. Accounting approach

26. The budget that describes the long-term position, goals, and objectives of an entity within its
environment is the
a. Capital expenditure budget
b. Operation budget
c. Strategic budget
d. Bracket budget

27. Which of the following statement/s is/are false regarding zero-based budgeting?

Statement 1: All activities in the company are organized based on packages or break-up units

Statement 2: All costs have to be justified every budgeting period

Statement 3: The process is not time consuming since justification of costs can be done as a
routine matter.

a. Statement 1
b. Statement 2
c. Statement 3
d. All statements are true

28. Rolling budget is

a. Budget is one that is revised on a regular basis. Typically, a company extends such a budget for
another month or quarter in accordance with new data as the current month or quarter ends.
b. Presents planned activities for a period but do not present a firm commitment.
c. All activities in the company are organized based on packages or break-up units
d. The budget which is used to identify revenues and expenses on the basis of the individual who
has the control over its incurrence

29. The following budgets are normally prepared under which order?
1. Sales budget
2. Cash budget
3. Inventory budget
4. Production budget
5. Purchase budget

a. 1, 4, 3, 5, 2
b. 1, 3, 4, 5, 2
c. 2, 1, 4, 3, 5
d. 1, 5, 3, 4, 2

30. The foundation of the operations budget is the

a. Sales forecast
b. Cost and expense budget
c. Cash budget
d. Production plan
31. Which of the following budgets is usually the most difficult to prepare?
a. Production budget
b. Expense budget
c. Manufacturing overhead budget
d. Sales budget

32. This budget facilitates better cost control such as the comparison of the budgeted and actual
performance for a given period
a. Fixed budget
b. Zero-based budget
c. Continuous budget
d. Flexible budget

33. All of the following represents a sign of budget weakness, except?

a. Significant unfavorable variances are not investigated and corrected.
b. Budget preparers do not keep current
c. Use of budgetary slack
d. The budget is prepared using different methods each years

34. The following are the advantages of budgets, except

a. Links objectives and resources
b. Establishes guidelines in the form of a road map to proceed in the right direction
c. Encourages delegation of responsibility and enables managers to focus more on the specifics of
their plans and how realistic the plans are, and how such plans may be effectively achieved
d. A budget may reward managers who set modest goals and penalize those who set ambitious
goals that are missed.

35. The following are the disadvantages of budgets, except?

a. There is judgment and subjectivity in the budgeting process.
b. Managers may consider that budgets redirect their flexibility to adjust to changing conditions.
c. A budget may reward managers who set modest goals and penalize those who set ambitious
goals that are missed.
d. Aids coordination between departments to attain efficiency and productivity.

36. Which one of the following statements regarding the difference between a flexible budget and a static
budget is true?
a. Flexible budget is better used for a relatively stable company than static budget
b. Static budget allows flexibility for varying circumstances than the flexible budget
c. Flexible budget treats all costs as variable costs unlike a static budget which includes only fixed
costs
d. A flexible budget provides cost allowances for different levels of activity whereas a static budget
provides costs for one level of activity.

37. The procedure for setting profit objectives in which management specifies a given rate of return that it
seeks to realize in the long run by means of planning toward that end is the
a. priori method
b. pragmatic method
c. theoretical method
d. ad hoc method

38. Budgeting process in which information flows top down and bottom up is referred to as:
a. Continuous budgeting
b. Perpetual budgeting
c. Participative budgeting
d. Joint budgeting
39. When management seeks to achieve personal departmental objectives that may work to the
detriment of the entire company, the manager is experiencing:
a. budgetary slack
b. padding
c. goal conflict
d. cushions

40. Budgets need to be fair and attainable for employees to consider the budget important in their normal
daily activities. Which of the following is not considered a human behavior problem?
a. Allowing employees, the opportunity to be a part of the budget process.
b. Setting goals among managers that conflict with one another.
c. Setting goals too tightly making it difficult to meet performance expectation.
d. Allowing goals to be so low that employees develop a “spend it or lose it” attitude.

41. Which of the following is included in a firm’s financial budget?

a. Cash budget
b. Sales budget
c. Capital budget
d. Both A and B

42. The cash budget should help to ensure

a. That enough cash is on hand at all times to satisfy maximum cash requirements
b. That cash dividends can be paid every quarter
c. That sufficient cash is available to pay salaries, even if it means borrowing the money
d. Sufficient liquidity without an excess amount of idle cash

43. Jlyn Company is preparing budgets for the year ending December 31, 2022. The sales manager
expects sales for the succeeding quarters as follows:

First quarter 5,000 units

Second quarter 5,500 units
Third quarter 5,800 units
Fourth quarter* 8,200 units
First Quarter – 2023 5,200 units
Second Quarter – 2023 5,400 units
*peak season

The sales price per unit is P100.00 per unit

Sales Revenue are expected to be collected as follows

70% at the quarter when sales are made
30% at the quarter following

How much is the total cash receipts from sales for the third quarter of the year?
a. P350,000
b. P535,000
c. P571,000
d. P748,000
44. Bondat Co. has projected sales to be P1,200,000 in January, P1,500,000 in February, and
P1,600,000 in March. Bondat wants to have 50% of next month’s sales needs on hand at the end of
a month. If Bondat has an average gross profit of 40%, what are the February purchases?
a. P620,000
b. P856,000
c. P930,000
d. P1,550,000

45. Taba Company budgeted purchases of P500,000. Cost of sales was P600,000 and the desired
ending inventory was P210,000. The beginning inventory was
a. P100,000
b. P210,000
c. P160,000
d. P310,000

46. Piggy Company has a collection schedule of 60% during the month of sales, 15% the following
month, and 15% subsequently. The total credit sales in the current month of February and March
were P150,000 and P160,000, respectively, and total collections in March were P127,500. What were
the credit sales in January?
a. P180,000
b. P90,000
c. P60,000
d. P64,000

47. Each unit of finished product uses 6 kilograms of raw materials. The production and inventory
budgets for July 2024 are as follows:

Beginning Inventory:
Finished goods 30,000 units
Raw materials 42,000 kg.

Budgeted unit sales 36,000 units

Planned ending inventory

Finished goods 22,800 units
Raw materials 48,800 kg.

During the production process, it is usually found that 10% of production units are scrapped as
defective and this loss occurs after the raw materials have been placed in process. How many
kilograms of raw materials should be purchased in July?
a. 179,600
b. 192,000
c. 196,880
d. 198,800
48. Samgyup Company expects its June sales to be P600,000, which is 25% higher than its May sales.
Purchases were P400,000 in May and are expected to be P480,000 in June. All sales are on credit
and are collected as follows: 80% in the month of the sale and 20% in the following month. All
payments in the month of sales are given 2% discount. Sixty-percent of purchases are paid in the
month of purchase to take advantage of purchase term of 1/10, n/40. The remaining amount is paid in
the following month. The beginning cash balance on June 1 is P40,000. The ending cash balance on
June 30 would be:
a. P128,320
b. P161,280
c. P146,000
d. P170,880

49. Budang company, a merchandising firm, is preparing its master and has gathered the following data
to help budget cash disbursements:

Budgeted data:
Cost of inventories to be sold P680,000
Desired decrease in inventories 50,000
Desired decrease in accounts payable 130,000

All of the accounts payables are for inventory purchases and all inventories are purchased on
account. What are the estimated cash disbursements for inventories for the budget period?
a. P600,000
b. P500,000
c. P550,000
d. P760,000
50. The Production Manager of Ship Co. is currently preparing the manufacturing budget for the coming
year 2022. Details of the estimated production in units are as follows:

First quarter 5,150 units

Second quarter 5,530 units
Third quarter 6,040 units
Fourth quarter 7,900 units
First quarter – 2023 5,220 units

Current budgeting policy estimates the following ending inventories that would satisfy the volume
requirements of the upcoming year:

Finished Goods: 10% of the following quarter’s sales

Raw Materials: 20% of the following quarter’s volume requirements

Furthermore, the company’s financial statements as of December 31, 2021 show the following ending
balances:

Finished goods 400 units 17,000

Raw materials 2,000 units 16,000
Total 33,000

For simplicity, any work in process is considered negligible. The company follows a 2:1 ratio between
its raw materials and finished goods inventory, respectively. How many units of raw materials must
be purchased during the first half of 2022?
a. 10,512 units
b. 21,767 units
c. 21,776 units
d. 27,552 units

(Use the following information for numbers 33 to 35)

Budang Incorporated manufactures and sells home and office furniture. Estimated sales for the next four
months are:

September P250,000
October 200,000
November 300,000
December 450,000

Sales for August were P200,000. All sales are on account. Budang Inc. estimates that 40% of the
accounts receivable are collected in the month of sale with the remaining 60% collected the following
month. The units sell for P50 each. The cash balance for September 1 is P100,000.

Generally, 55% of purchases are due and payable in the month of purchase with the remainder due the
following month. Purchase cost per unit is P18. The company maintains an end-of-the-month inventory of
1,000 units plus 10% of next month’s unit sales.

51. Cash receipts during October?

a. 220,000
b. 200,000
c. 230,000
d. 240,000
52. Cash disbursement during October from September purchases?
a. 48,510
b. 81,270
c. 39,690
d. 41,580

53. Supposing all cash transactions during the last quarter pertain to sales and purchases only, how
much is the cash balance as of November 30?
a. 570,030
b. 530,620
c. 430,620
d. 670,030

Use the following information for the next items

Egla Corporation, a cement manufacturer, has been in operations since 2019. It has the newest and
largest integrated cement facility in the country which enabled it to produce 100 million metric tonnes
(MT) of cement annually. Its sales had constantly increase for the last 3 years due to its low cement
prices for every 40 kg-bag. It has two main products: Type 1 and Type 1P. Type 1, which has a higher
concentration of limestone and much stronger than Type 1P, are being sold directly to construction
companies for use in the construction of high-rise building. On the other hand, Type 1P are being sold to
wholesalers and retailers for the construction of households.

In the past years, the Company had been using a traditional costing system which uses the number of
bags in allocating overhead. However, review of cost structure across the products showed that such may
not be appropriate anymore. Esy Barco, the vice president for productions, suggested for the
implementation of Activity-based costing system which was supported by the president, Shantee Paniel,
and approved by the board of directors.

It was later determined that the Company has four relevant activities: Packaging, Order Processing,
Machine Processing and Production inspection. Data relevant to these activities and the related cost
drivers follow:

Activity Activity Base

Packaging 37,500,000 7,500 batches
Order Processing 21,250,000 5,000 orders
Machine Processing 3,000,000 3,187,500 machine hours
In process inspections 63,750,000 31,875,000 bags
P125,500,000

Additional information is provided as follows:

● An order for 4,250 bags of Type 1P cement has the following job order information:

Direct material per bag P5.50

Direct labor cost per hour 9.00
Direct labor hours per bag 0.20
Machine hours per bag 0.10
 ● Sales forecast for Type 1P cement in bags for the last quarter of 2021:

October 4,250,000
November 5,312,500
December 5,100,000

● The company plans to maintain ending finished goods inventory equal to 50% of the next month’s
sales and applies Just-In-Time inventory policy for its raw materials

● The Company wanted to minimize its stock of finished goods inventory in the warehouse on
December 30, 2022 at 1,500,000 bags only.

54. How much are the total materials purchased for Type 1P for the month of December?
a. 29,218,750
b. 28,634,375
c. 26,296,875
d. 22,275,000

55. How much is the forecasted direct labor costs for Type 1P for the month of November?
a. 7,650,000
b. 8,606,250
c. 9,371,250
d. 7,290,000

56. How much is the forecasted overhead costs for Type 1P for the month of October under ABC?
a. 21,780,000
b. 17,295,882
c. 20,418,750
d. 22,233,750

57. If the price of each bag of Type 1P cement is P10, how much is the contribution margin for the month
of November if 40% of the total overhead applied to the production is fixed?
a. P585,000
b. P731,250
c. P702,000
d. P2,018,250

58. How much is the estimated carrying amount for inventory for external reporting purposes, if the
company’s policy for Type 1P was followed at the end of the coming year and assuming the inventory
is not expected to be impaired?
a. 14,793,529
b. 17,355,882
c. 14,091,176
d. Cannot be determined
59. The Golden Monkey Company is preparing its cash budget for the month of October. The following
information is available concerning its accounts receivable:

Estimated credit sales for October P160,000

Actual credit sales for September 175,000
Estimated collections in October for credit sales in October 25%
Estimated collections in October for credit sales in September 60%
Estimated collections in October for credit sales prior to September P12,000
Estimated write-offs in October for uncollectible credit sales 5,000
Estimated provision for bad debts in October for credit sales in October 6,000

What are the estimated cash receipts from accounts receivable collections in October?
a. P149,000
b. P157,000
c. P142,000
d. P150,000

60. Hibiscus, Inc. projects the following activities related to its financial operations:

a. Issuance of shares of company’s own common stock: P165,000

b. Issuance of mandatorily redeemable preference shares: P35,000
c. Dividends to be paid to the company’s own shareholders: P27,000
d. Dividends to be paid to redeemable preference shares: P3,000
e. Dividends to be received from investments in other companies shares: P4,000
f. Interest to be paid on the company’s own bonds: P11,000
g. Repayment of principal on the company’s own bonds: P50,000
h. Proceeds from sale of the company’s used equipment: P23,000

In cash financial budget, the net cash used by financing activities should be projected to be
a. P158,000
b. P120,000
c. P123,000
d. P113,000