Question

The LaGrange Corporation had the following budgeted sales for the first half of the current year:...

The LaGrange Corporation had the following budgeted sales for the first half of the current year:

Cash Sales Credit Sales
January $ 50,000 $ 150,000
February $ 55,000 $ 170,000
March $ 29,000 $ 130,000
April $ 24,000 $ 109,000
May $ 34,000 $ 200,000
June $ 80,000 $ 30,000

The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:

Collections on sales:

45% in month of sale

35% in month following sale

20% in second month following sale

The accounts receivable balance on January 1 of the current year was $71,000, of which $55,000 represents uncollected December sales and $16,000 represents uncollected November sales.

The total cash collected during January by LaGrange Corporation would be:

Homework Answers

Answer #1

December remaining receivables = $55,000

45% of December credit sales would have been collected in December.

Thus, $55,000 represents 55% of credit sales of December.

December credit sales = 55,000 x 100/55

= $100,000

Schedule of expected cash collection for January

Cash sales 50,000
Cash collection from January credit sales (150,000 x 45%) 67,500
Cash collection from December credit sales (100,000 x 35%) 35,000
Cash collection from November credit sales 16,000
Total cash collection $168,500

The total cash collected during January by LaGrange Corporation would be = $168,500

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