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Calculating cash reciepts

Forums › Ask CIMA Tutor Forums › Ask CIMA F1 Tutor Forums › Calculating cash reciepts

  • This topic has 3 replies, 2 voices, and was last updated 5 years ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • June 23, 2020 at 10:03 am #574521
    n.dolan
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Could you please explain why they did not discount the cash sales by 5% as it would have been paid within the 14 days? Thanks

    Question:
    The information below relates to ABC.

    Forecast Sales
    $
    Jan 60,000
    Feb 45,000
    March 69,000
    April 58,000

    80% of sales are made on credit and the collection of credit sales has the following pattern.

    Within 14 days 40% (A cash discount of 5% is given).
    The month following sale 30%
    The second month following sale 20%
    The third month following sale 10%

    Solution:
    THE ANSWER IS $57,792

    cash sales
    April 20% x 58,000 11,600

    Credit sales
    Jan sales 60,000 x 80% x 10% 4,800
    Feb sales 45,000 x 80% x 20% 7,200
    Mar sales 69,000 x 80% x 30% 16,560
    Apr sales 58,000 x 80% x 40% x 95% 17,632
    Total cash receipts in April 57,792

    June 23, 2020 at 8:43 pm #574578
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Hi,

    I think that they have included the 5% discount as they have multiplied the expected cash receipt by 95%.

    Thanks

    June 24, 2020 at 10:12 am #574600
    n.dolan
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Hi,

    Yes, they have multiplied April sales by 95% but only the credit sales that were paid within the 14 days:
    Credit sales: ‘Apr sales 58,000 x 80% x 40% x 95% 17,632’

    However, for the 20% of cash sales, it appears they have simply taken the total cash sales and multiplied it by 20% and have not accounted for the 5% discount.
    Cash sales: ‘April 20% x 58,000 11,600’.

    Thanks

    June 27, 2020 at 4:07 pm #574820
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Is it not because there would be no discount as the cash was received after the 14 day period? If you don’t pay within 14 days then you do not get the discount.

    Thanks

  • Author
    Posts
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