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:

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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