12. The following information was taken from Hurlbert Company cash budget for th
ID: 2549416 • Letter: 1
Question
12. The following information was taken from Hurlbert Company cash budget for the month June Beginning cash balance Cash receipts Cash disbursements If the company has a policy of maintaining an end of the month cash balance of $60,000, the amount the company would have to borrow is A) $36,000. B) $15,000. C) $24,000. D) S0 S69,000 93,000 117,000 13. From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that A) bond interest is deductible for tax purposes. B) interest must be paid on a periodic basis regardless of earnings. C) income to stockholders may increase as a result of trading on the equity. D) the bondholders do not have voting rights. 14. Which of these describes the major difference between stocks and bonds? A) B) C) Stocks are cheaper than bonds. Bonds represent a safer investment than stocks. Stockholders own a piece of the company while bondholders have loaned money to the company Companies have to pay back stockholders but not bondholders. D) 15. Gross profit equals the difference between A) net income and operating expenses. B) net sales revenue and cost of goods sold. C) sales revenue and operating expenses. D) sales revenue and cost of goods sold plus operating expenses 16. The control principle related to not having the same person authorize and pay for goods is known as A) establishment of responsibility B) independent internal verification. C) separation of duties. D) rotation of duties.Explanation / Answer
~12. Ans-option(B)
Solution:
Given,
opening balance of cash of hurlbert company = $69,000
cash receipts for the month = $93,000
cash disbursements for the month = $1,17,000
minimum cash to be maintained at the end = $60,000
Therefore the amount that has to be borrowed in order to meet the policy requirements of the hurlbert company is as follows:
= opening balance of cash + cash reciepts - cash disbursements - closing balance to be maintained
= $69,000 + $93,000 - $1,17,000 - $60,000
=($15,000)
Therefore $15,000 has to be borrowed in order to meet requirements of hurlbert company.
~13.Ans-option(B)
Solution:
The main disadvantage of issuing bonds lies in its fixed payment as return for them regardless of profit or loss for the company. They being debt for the company need to be paid a fixed sum of money (percentage which is agreed at the inception time) in return to them.
~14.Ans-option(C)
Solution:
share holders are the owners of the company,return of thier capital(at the time of liquidation) is not guaranteed.
bond holders are the debt of the company ,return of thier capital is not optional but absolutely guaranteed.
Therefore the major difference between shareholders and bondholders is that shareholders own a piece of company while bondholders loaned a sum of money.
~15.Ans-option(C)
Solution:
we know that , when we deduct operating expenses from gross sales revenue then we arrive at gross profit.
Therefore GROSS PROFIT = SALES REVENUE - OPERATING EXPENSES
~16.Ans-option(C)
solution:
There are so many principles which are related to the maintenance of internal control system. As a part of that not having authorization to the same person regarding two activities is known as SEPERATION OF DUITIES.
*For example when we go to a bank there we can see that one person authorises the payment voucher and another person accepts or pays the sum of money.
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