Question 1

An agricultural exporter has the following sales forecast:
January: $100,000
February: $120,000
March: $150,000

Customers pay 40% in the month of sale, 50% in the month following the sale, and 10% is written off as bad debts.

What are the expected cash receipts from sales in March?

Accepted Answer

Calculate cash from March sales (40% of $150k) and add cash from February sales collected in March (50% of $120k). Ignore bad debts for cash flow.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Trying to deduct bad debts from the cash collected, or calculating cash for the wrong month.

An agricultural exporter has the following sales forecast:
January: $100,000
February: $120,000
March: $150,000

Customers pay 40% in the month of sale, 50% in the month following the sale, and 10% is written off as bad debts.

What are the expected cash receipts from sales in March?

How to approach this question