# Cash Management Level 4 AQ2013 Practice Assessment 2 Help?

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Registered Posts: 10
Hi all

I have been going through the 2013 practice paper 13 and I'm a little stuck on how to calculate a couple of figures, can someone help explain?

Task 3a) Image of question: https://flickr.com/photos/124836893@N07/15221099724/
"Complete the table below to identify the total sales receipts forecast for periods 5 and 6. Identify the forecast trade receivables balance at the end of period 3 and the irrecoverable debt provision for period 4."

Total sales receipts period 5: £138,480
Total sales receipts period 6: £141,780

Trade receivables balance at the end of period 3 is forecast to be: £207,480
The provision for irrecoverable debts for period 4 is forecast to be: £7,080

"The company pays its suppliers on the basis of 45% one month after the date of purchase and 55% two months after the date of purchase"

At the end of period 3 the balance of trade payables is forecast to be: £128,017.50

"Complete the table below to identify the value of trade payables that will be paid in periods 4 and 5"

Settlement of trade payables period 4: £82,972.50
Settlement of trade payables period 5: £83,070

How are all of these figures calculated?

Task 4) Image of complete cash budget: https://flickr.com/photos/124836893@N07/15655846788/
"Wilson Plc has provided the partially completed cash budget for periods 6 and 7.."

Mortgage Payment:
Notes: "The company has within the last few months taken a mortgage out on their premises. The premises cost £4,000,000 and the mortgage was 90% loan to value. The mortgage is over a 10 year period and interest is charged on the initial balance at 4% per annum on a flat rate interest basis. Payments are made on a monthly bases and include both interest and capital."

Mortgage payment figure for period 6 and 7 is: £42,000

How do you reach that figure?

• Registered Posts: 214 Beyond epic contributor 🧙‍♂️
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I can help with task 4
90% x 4,000,000 = 3600,000
3,600,000 / 120 months = 30,000/month - this is capital repayment.
Now interest

3,600,000 x 4% = 144,000 /annum
144,000/ 12 months = 12,000/month

30000+12000 = 42000
• Registered Posts: 10
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@liveprincess Thank you! That actually seemed really easy! I forgot to put it on here but do you know how to calculate the overdraft interest on task 4? The answer is (8400) for P6 and 0 for P7
• Registered Posts: 10
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I managed to figure this out the sales receipts:
Total sales receipts period 5: £138,480
Total sales receipts period 6: £141,780

I don't know how to get my receivable figures from the information provided in the question
• Registered Posts: 645
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3a) Receivables - you just need to break down what has and hasn't been paid.

eg. Period 3 receivables made up of:
Period 3 sales - 15% paid in period, therefore 85% outstanding in receivable balance.
Period 2 sales - 15% paid in period 2, 35% paid in period 3, therefore 50% outstanding in receivables balance.
Period 1 sales - 15% paid in period 1, 35% paid in period 2, 45% paid in period 3, leaving 5% outstanding in the receivables balance. Although a provision is made against this, it remains part of the balance until it is actually written off, so still needs to be included in the total.

The provision for irrecoverable debt is made in the period of sale; therefore the answer is simply 5% of period 4 sales.

3b)

You need to think about what will make up the balance.

Purchases are all paid for longer than one month after invoice; therefore all of month 3 purchases are outstanding as payables.

45% of purchases are paid in the period following purchase. Therefore of the period 2 purchases, 45% have been paid for, leaving 55% outstanding (which are paid two periods after purchase).

Therefore to get to the answer: period 3 purchases + 55% of period 2 purchases.

3c)

Same logic as above; in period 4 you will be paying:
45% of period 3 purchases
55% of period 2 purchases.

Hope that helps - just think things through logically, the maths itself is straightforward.
• Registered Posts: 10
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@CeeJaySix Thank you so much! Just a quick question - on 3b you include:

P3 purchases: £81,900
55% (left over) of P2 purchases: £46117.50

But why don't you also include:
45% (left over) of P1 purchases: £20913.75

What is the reason for this non being used?

• Registered Posts: 645
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Lisa,

It's in the detail. 45% of purchases are paid 2 periods after the date of purchase. Therefore any purchase in period 1 will be paid before the end of period 3 (2 months after 31st Jan is 31st March). As the question asks for the payables at the period end, all period 1 payables have paid up by the period 3 end.
• Registered Posts: 10
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@CeeJaySix Oh of course! I understand now. Thank you for all your help - lifesaver!