Home › US CMA Part 1 › Management Accounting › Budgeting › March cash payments are $18,600 for cash purchas…
March cash payments are $18,600 for cash purchases, $26,040 for March purchases on account, $9,450 for February purchases on account and $2,380 for January purchases on account. What is the March total?
A$39,540
B$56,470
C$66,570
D$54,090
Answer & Solution
Correct answer: B. $56,470
1. Each month the company pays for its cash purchases plus payables from the current and previous two months.
2. The four March amounts are $18,600, $26,040, $9,450 and $2,380.
3. Their total is $56,470 of cash paid in March.
4. The $2,380 is 10% of the January payables, the last instalment on that month of buying.
5. $39,540 is the February total, before the oldest instalment started arriving.
6. $54,090 drops the $2,380 tail, which is the trap in a three month settlement pattern.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 7.10 Cash Budget_
Related questions
How should budget figures be understood once the period they cover has ended?A capital expenditures budget for 2021 lists cutting machinery $18,000, assembly machineryWhat does a capital expenditure budget list?January estimated cash receipts are $118,000, including $50,000 from issuing stock, and esA company pays 30% of purchases in cash and 60% of purchases on account in the month of puIn March a company collects $24,800 of cash sales, $39,680 from March sales on account, $3January sales are $68,000, of which 20% are for cash and the rest on account, and 40% of sWhat does the cash budget estimate?