CMA Intermediate · Financial Management and Business Data Analytics · Management of Cash and Cash Equivalents
Sundaram Traders expects credit sales of Rs 4,00,000 in March, Rs 5,00,000 in April and Rs 6,00,000 in May. Collections are 40% in the month of sale, 40% in the next month and 20% in the second month after sale. What is the expected cash collection from sales in May?
May collections are Rs 5,20,000: 40% of May sales (Rs 2,40,000), plus 40% of April sales (Rs 2,00,000), plus 20% of March sales (Rs 80,000). Each month's sales are collected over three months in the stated proportions.
- ARs 4,80,000
- BRs 5,20,000Correct
- CRs 5,00,000
- DRs 2,40,000
Explanation
May collections = 40% of May (2,40,000) + 40% of April (2,00,000) + 20% of March (80,000) = Rs 5,20,000. Rs 4,80,000 results from omitting the 20% March collection and adding only part of the others incorrectly.
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