ExpertHard2 marksShort Answer
ACCA · Question 20 · Syllabus D: Budgeting
A subscription box service is preparing its cash budget for March.
Sales are budgeted as follows:
- January: $100,000
- February: $120,000
- March: $150,000
Customers pay as follows:
- 20% in the month of sale (cash sales)
- 50% in the month following sale
- 28% in the second month following sale
- 2% are bad debts (never collected)
Calculate the total cash receipts budgeted for March. (Enter number only, no commas or symbols)
A subscription box service is preparing its cash budget for March.
Sales are budgeted as follows:
- January: $100,000
- February: $120,000
- March: $150,000
Customers pay as follows:
- 20% in the month of sale (cash sales)
- 50% in the month following sale
- 28% in the second month following sale
- 2% are bad debts (never collected)
Calculate the total cash receipts budgeted for March. (Enter number only, no commas or symbols)
How to approach this question
Calculate March cash sales (20% of March). Add February collections (50% of Feb). Add January collections (28% of Jan). Ignore bad debts.
Full Answer
Cash receipts in March come from three sources:
1. March sales collected in March: 20% × $150,000 = $30,000
2. February sales collected in March: 50% × $120,000 = $60,000
3. January sales collected in March: 28% × $100,000 = $28,000
Total cash receipts = $30,000 + $60,000 + $28,000 = $118,000.
Common mistakes
Applying the percentages to the wrong months, or trying to deduct bad debts from the cash collected (bad debts are already excluded from the 20+50+28 = 98% collection profile).
Practice the full ACCA MA — Management Accounting Practice Exam 1
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