ExpertHard2 marksShort Answer
ACCA · Question 21 · Budgeting
Section A
TimberExport Ltd is preparing its cash budget. Budgeted sales are:
- January: $100,000
- February: $120,000
- March: $150,000
Sales are 20% cash and 80% credit.
Credit sales are collected as follows:
- 50% in the month following the sale
- 28% in the second month following the sale
- 2% are bad debts
Calculate the total cash receipts budgeted for the month of March.
(Enter your answer as a whole number)
Section A
TimberExport Ltd is preparing its cash budget. Budgeted sales are:
- January: $100,000
- February: $120,000
- March: $150,000
Sales are 20% cash and 80% credit.
Credit sales are collected as follows:
- 50% in the month following the sale
- 28% in the second month following the sale
- 2% are bad debts
Calculate the total cash receipts budgeted for the month of March.
(Enter your answer as a whole number)
How to approach this question
.
Full Answer
The collection pattern accounts for 100% of total sales (20% cash + 50% 1 month later + 28% 2 months later + 2% bad debt).
Receipts in March:
- Cash sales in March: 20% × $150,000 = $30,000
- Credit collected from February (1 month prior): 50% × $120,000 = $60,000
- Credit collected from January (2 months prior): 28% × $100,000 = $28,000
Total March receipts = $30,000 + $60,000 + $28,000 = $118,000.
Common mistakes
Applying the 50% and 28% to the 80% credit portion instead of the total sales figure (which would leave a gap in the 100% total).
Practice the full ACCA MA — Management Accounting Practice Exam 6
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