 In this presentation, we will take a look at multiple choice questions related to budgeting, going through the questions, and then practicing test taking skills with them. First question. First, a word from our sponsor. Actually, we're sponsoring ourselves on this one, because apparently the merchandisers, they don't want to be seen with us. But that's okay, whatever, because our merchandise is better than their stupid stuff anyways. Like our Accounting Rocks product line. If you're not crunching cords using Excel, you're doing it wrong. A must-have product, because the fact as everyone knows of accounting being one of the highest forms of artistic expression means accountants have a requirement, the obligation, a duty to share the tools necessary to properly channel the creative muse. And the muse, she rarely speaks more clearly than through the beautiful symmetry of spreadsheets. So get the shirt, because the creative muse, she could use a new pair of shoes. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com. Long-term liability data can be gotten from, A, the cash budget and capital expenditures budget, B, the cash budget and purchases budget, C, the cash budget and budgeted income statement, D, the sales budget and production budget, or E, the cash budget and debt budget. Let's go to this again using the process of elimination. Long-term liability data can be gotten from either, A, the cash budget and capital expenditures budget. Now, if we're talking about long-term liability, you would think cash might be involved, because we'd have a cash, you know, the long-term liability could have gone up or down because of we got cash on the liability, so possibly and capital expenditures, that's purchasing things like big things like property, plant and equipment, which could result in a liability. So that sounds like it's possible. So we'll keep that for now. B says the cash budget and purchases budget. And again, we have the same kind of thinking there. Well, cash, you know, could be, could be involved for sure. And then the purchases budget, usually we think of purchases of merchandise. So you would think that that would go to a accounts receivable and not the long-term liability, but maybe, you know, I'll keep it for now. C says the cash budget and budgeted income statement. Now, the cash budget seems reasonable, but the income statement isn't really with a long-term liability will be. We might see interest on the income statement, but the long-term liability itself would be on the balance sheet. So probably not C. D says the sales budget and the production budget. So on the sales side, why would we need to know sales for long-term liability? They're not really connected. There's not much, you know, there. And then the production and then the production budget. So probably not D. And then E says the cash budget and the debt budget. That sounds kind of reasonable. You would think you'd have the cash budget and a debt budget. So I'll keep that for now. So let's go through this again. Long-term liability data can be gotten from A says the cash budget and capital expenditures budget. And that again, that sounds kind of reasonable. Cash budget, capital expenditures. B says the cash budget and purchases budget. So of that, of those two, I think B's, you know, they're similar, both cash and then we got capital versus purchases. I would think capital would be more appropriate because that would result in long-term liability as opposed to accounts payable. And then E says the cash budget and debt budget. Now that seems really reasonable, except for the fact that we don't usually have, you know, a debt budget because it's not often we don't have another budget. It's just the debt budget. So we might have schedules to help us out with the debt budget. So the final answer is actually A on this one. So long-term liability data can be gotten from A, the cash budget and capital expenditures budget. Next question. Which of the following must be prepared before the direct labor budget? A, budgeted income statement. B, cash budget. C, capital expenditures budget. D, production budget. Or E, budgeted balance sheet. Let's go through this again using the process of elimination. Which of the following must be prepared before the direct labor budget? Either A, budgeted income statement. Now when we see a question like this, once again we're thinking about the order of operations, the order of the budgets. We have to do all the budgets in a certain type of order in order to do them correctly. Otherwise we will have a mess and it starts with basically we have to start up with the sales type stuff happening first and then go through the order the end items that we're typically going to have are going to be the financial statements which would include the income statements. So which would have to be prepared before the direct labor budget? Well the direct labor budget is not the first thing we do. It's somewhere in the middle. But the income statement, the budgeted income statement, it's like the last thing we do. So we're probably not going to be doing that before we have to do the direct labor budget. So I don't think it's going to be A. B says the cash budget. And the cash budget is pretty close to the bottom again. It's kind of like one of the later stuff we do. So I would think that the cash budget probably not going to be done before the direct labor budget. It's down close to the final product down close to the financial statements or the budgeted financial statements. How about C? Capital expenditures budget. And again, that's getting kind of low down on the list here. I'll keep that one for now. But that's pretty down there. D says the production budget. So the production budget, you know, that's what's going to be a little bit higher up on the list. We got to do that, you know, somewhat in the beginning of the process. So that could quite possibly be it. And E says the budgeted balance sheet. And again, that's kind of like the final product. That's like at the end. So we're probably not going to be doing the budgeted balance sheet before we do the direct labor budget. That would be silly. So now we're looking at C and D's between C and D. If we just look at the order of operations, you got the capital expenditures budget and the production budget. Usually we would do the production budget before the capital expenditure budget. So the fact that the production budget is done after the cap, the fact that the capital expenditure is done after the production budget means that it's probably not the one and therefore the one would be D. We're left with our final answer D. And so that would be which of the following must be prepared before the direct labor budget D, the production budget.