Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 26, Problem 1MC
Summary Introduction
To prepare: The cash budget of K manufacturing.
Cash Budget:
Cash budget is prepared to ascertain the amount of cash after a given period of time. Cash budget is a statement that contains the information of cash receipts and cash payments. Closing balance of cash is calculated with the help of cash budget.
Short Term Financial Plan:
The management of every company maintains a plan for short term investment. The short term investment is needed to fulfill the short term financial needs of the company. Every company has different short term financial policy related to the nature and size of the business.
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Suppose that Demont has been given a summer job as an intern at Isaac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan.
Classify each cost listed below as either product costs or period costs for the purpose of preparing the financial statements for the bank.
Costs Product Cost/Period Cost
1. Depreciated on salesperson's cars
2. Rent on equipment used in the factory
3. Lubricants used for machine maintenance
4. Salaries of personnel who work in the finished goods warehouse
5. Soap and paper towels used by factory workers at the end of a shift
Suppose that Demont has been given a summer job as an intern at Isaac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan.
Classify each cost listed below as either product costs or period costs for the purpose of preparing the financial statements for the bank.
Cost Product Cost/Period Cost
1. Factory supervisors' salaries
2. Heat, water, and power consumed in the factory
3. Materials used for boxing products for shipment overseas. Units are normally boxed.
4. Advertising costs
5. Workers' compensation insurance for factory employee
Suppose that Demont has been given a summer job as an intern at Isaac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan.
Classify each cost listed below as either product costs or period costs for the purpose of preparing the financial statements for the bank.
Cost Product Cost/Period Cost1. Depreciation on chairs and tables in the factory lunchroom 2. The wages of the receptionist in the administrative offices 3. Cost of leasing the corporate jet used by the company's executives 4. The cost of renting rooms at a Florida resort for the annual sales conference 5. The cost of packaging the company's product
Chapter 26 Solutions
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