Discuss CIMA CIMAPRO19-P01-1 Exam Topic 3 Question 130

JL is preparing its cash budget for the next three quarters. The following data have

been extracted from the operational budgets:

Additional information is available as follows:

* JL sells 20% of its goods for cash. Of the remaining sales value, 70% is received within the same quarter as sale and 30% is received in the following quarter. It is estimated that trade receivables will be $125,000 at the beginning of Quarter 1. No bad debts are anticipated.

* 50% of payments for direct material purchases are made in the quarter of purchase, with the remaining 50% in the quarter following purchase. It is estimated that the amount owing for direct material purchases will be $60,000 at the beginning of Quarter 1.

* JL pays labour and overhead costs when they are incurred. It has been estimated that labour and overhead costs in total will be $303,600 per quarter. This figure includes depreciation of $19,600.

* JL expects to repay a loan of $100,000 in Quarter 3.

* The cash balance at the beginning of Quarter 1 is estimated to be $49,400 positive.

Required:

Prepare a cash budget for each of the THREE quarters.

What will the closing balance of cash flows in quarter THREE be?

Suggested Answer: E

References:

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12 comments · newest first

Roxanne 2 months ago

I’m leaning towards option A. The calculations for receivables and payables are crucial here.

Isreal 2 months ago

I think option B looks good. The cash inflows seem solid for Quarter 3.

Shawnee 2 months ago

This question is tricky. I feel like I need to break down the cash flows carefully.

Shawna 2 months ago

Labour and overhead costs are fixed at $303,600 each quarter.

Irma 2 months ago

Wait, are we sure about no bad debts? That sounds too good to be true.

Odelia 2 months ago

I'm leaning towards option B, seems reasonable.

Tegan 3 months ago

I think the loan repayment will hit hard in Quarter 3.

Linette 3 months ago

JL sells 20% for cash, that's a solid start!

Dean 3 months ago

I think the cash balance at the beginning of Quarter 1 is crucial for the calculations. I hope I remember the right formulas for each quarter!

My 3 months ago

I feel a bit uncertain about how to handle the loan repayment in Quarter 3. Does it affect the cash balance directly?

Lisandra 3 months ago

This question seems similar to one we did in class about cash collections and payments. I think I need to focus on the timing of the cash flows.

Helga 3 months ago

I remember we practiced cash budgets, but I'm not sure how to calculate the cash inflows from sales accurately.

CIMAPRO19-P01-1 Exam - Topic 3 Question 130 Discussion