ExpertHard10 marksShort Answer
ACCA · Question 36 · Budgeting
Section B — Multi-Task Scenario 1 (Budgeting)
Scenario: AquaVitae Public Utility
AquaVitae manages water desalination plants. You are preparing the cash budget for Quarter 2.
Forecast Data for Quarter 2:
- Water Sales Revenue: $850,000 (All received in cash in Q2)
- Government Grant: $150,000 (Approved in Q1, cash to be received in Q2)
- Operating Costs: $420,000 (This figure includes $40,000 for depreciation of plant machinery. All other operating costs are paid in cash in Q2)
- Capital Expenditure: $200,000 (New filtration system, paid in cash in Q2)
- Interest Payment on Loan: $25,000 (Paid in cash in Q2)
Task:
Calculate the Net Cash Flow for Quarter 2.
(Enter your answer as a whole number. If negative, include a minus sign)
Section B — Multi-Task Scenario 1 (Budgeting)
Scenario: AquaVitae Public Utility
AquaVitae manages water desalination plants. You are preparing the cash budget for Quarter 2.
Forecast Data for Quarter 2:
- Water Sales Revenue: $850,000 (All received in cash in Q2)
- Government Grant: $150,000 (Approved in Q1, cash to be received in Q2)
- Operating Costs: $420,000 (This figure includes $40,000 for depreciation of plant machinery. All other operating costs are paid in cash in Q2)
- Capital Expenditure: $200,000 (New filtration system, paid in cash in Q2)
- Interest Payment on Loan: $25,000 (Paid in cash in Q2)
Task:
Calculate the Net Cash Flow for Quarter 2.
(Enter your answer as a whole number. If negative, include a minus sign)
How to approach this question
1. Sum all cash receipts (Sales + Grant).
2. Sum all cash payments. Remember to exclude non-cash items like depreciation from the operating costs (420k - 40k = 380k cash operating costs).
3. Add Capital Expenditure and Interest to payments.
4. Net Cash Flow = Total Receipts - Total Payments.
Full Answer
Total Cash Receipts:
- Water Sales: $850,000
- Government Grant: $150,000
Total Receipts = $1,000,000
Total Cash Payments:
- Cash Operating Costs: $420,000 - $40,000 (depreciation) = $380,000
- Capital Expenditure: $200,000
- Interest Payment: $25,000
Total Payments = $380,000 + $200,000 + $25,000 = $605,000
Net Cash Flow = Total Receipts - Total Payments
Net Cash Flow = $1,000,000 - $605,000 = $395,000.
Common mistakes
Including the $40,000 depreciation as a cash outflow, which would incorrectly result in a net cash flow of $355,000.
Practice the full ACCA MA — Management Accounting Practice Exam 6
38 questions · hints · full answers · grading
More questions from this exam
Q01**Section A**
Global Wildlife Trust, an international NGO, is deciding whether to expand its con...EasyQ02**Section A**
CloudSync, a rapidly growing SaaS tech startup, monitors the daily server uptime a...EasyQ03**Section A**
AgriGrow operates a network of automated hydroponic farms. The management accounta...MediumQ04**Section A**
A municipal water treatment plant utilizes both financial accounting and managemen...EasyQ05**Section A**
In a boutique consulting firm, management relies heavily on quantitative variance ...Medium