Which of the following transactions will affect the cash budget for a particular
ID: 2452788 • Letter: W
Question
Which of the following transactions will affect the cash budget for a particular month in which each transaction occurs?
Sale of a product when payment will be received in 60 days
Payment for direct labor
Amortization of prepaid insurance
Depreciation of a piece of equipment that was purchased last year
A.Sale of a product when payment will be received in 60 days
B.Payment for direct labor
C.Amortization of prepaid insurance
D.Depreciation of a piece of equipment that was purchased last year
Explanation / Answer
Answer: (B) Payment for direct labor will affect the cash budget for a particular month in which transaction occurs.
Note:
Sale of a product when payment will be received in 60 days: Cash budget will be affected when cash will be received ie after 60 days.
Amortization of prepaid insurance: Cash budget would be affected in the month when cash was paid for the insurance
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