# Cash Management Level 4 AQ2013 Practice Assessment 2 Help?

Lisa_Carroll
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?

"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?

"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?

Thank you in advance!

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/[email protected]/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

**Task 3b)**"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

Task 3c)Task 3c)

"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/[email protected]/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?

Thank you in advance!

## Comments

21490% 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

1010Total 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

645eg. Period 3 receivables made up of:

Period 3 sales - 15% paid in period, therefore

85% outstandingin receivable balance.Period 2 sales - 15% paid in period 2, 35% paid in period 3, therefore

50% outstandingin receivables balance.Period 1 sales - 15% paid in period 1, 35% paid in period 2, 45% paid in period 3, leaving

5% outstandingin 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.

10P3 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?

645It'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.10