Question

A company anticipates selling $200,000 of goods, of which $15,000 will probably be uncollectible. Which of the following statements is true? a.$215,000 is added to the cash budget. b.$15,000 is subtracted from the cash budget. c.$15,000 does not appear on the cash budget. d.$185,000 appears as a disbursement on the cash budget. e.None of these choices are correct.

Answer 1

Answer:

The correct answers are:

$15,000 is subtracted from the cash budget. (b)

$185,000 appears as a disbursement on the cash budget. (d)

Explanation:

An uncollectible account is a receivable, loan, or other debts that have no chance of being paid. In this case, an uncollectible amount on sale are sales to which the product or service is given out, but no money is received in return.

Since the amount is not to be received, when planning a cash budget with the sales amount, instead of the original selling price of $200,000, $15,000 is deducted to given a net cash of $185,000 which is disbursed for funds.