Question

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:

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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