Question

1. Describe at least five benefits of budgeting. (1 point)

2. Wally-Mart has budgeted cost of goods sold for March of $50,000 for its men's shorts. Management wants to have $12,000 of shorts in inventory at the end of the month to prepare for the summer season. Beginning inventory in March was $7,000. What dollar amount of shorts should be purchased to meet the above plans? You must show your work to receive credit. (1 point).

3. San Pedro Co is preparing a cash budget for March. The company has $30,000 cash at the beginning of March and anticipates $70,000 in cash receipts and $93,000 in cash disbursements during March. San Pedro has an agreement with its bank to maintain a cash balance of $10,000. What amount, if any, must the company borrow during March to maintain a $10,000 cash balance?

Answer 1

1.

Budgeting is important because it helps you maintain a balance between your earning and spending. It puts you on the path toward achieving financial goals while building good credit and avoiding debt.

• Short-term benefits: Smart budgeting allows you to meet immediate needs like buying textbooks or paying your phone bill, as well as covering extracurricular items like going to a movie or taking a road trip.
• Medium-term benefits: Build resources over time for bigger-ticket items like a new computer or money for summer travel.
• Long-term benefits: Think beyond graduation. Budgeting all along can allow you to save, pay off student loans sooner and get a headstart on your retirement savings.
• Timeless benefits: You can never know when an emergency will occur, but if you’ve given yourself a financial cushion through good budgeting, you can handle it better when an emergency does arise.

2.

Shorts to be purchased = cost of goods to be sold + closing value of shorts - openning value of shorts

= 50,000 + 12,000 - 7,000

= 55,000

3.

Amount to be borrowed = Closing Cash balance - opening cash balance - cash receipts + cash disbursements

= 10,000 - 30,000 - 70,000 + 93,000

= $ 3,000