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 $ 60,000 $ 160,000
February $ 65,000 $ 180,000
March $ 44,000 $ 140,000
April $ 39,000 $ 124,000
May $ 49,000 $ 210,000
June $ 90,000 $ 180,000

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:

50% in month of sale

45% in month following sale

5% in second month following sale

The accounts receivable balance on January 1 of the current year was $74,000, of which $50,000 represents uncollected December sales and $24,000 represents uncollected November sales.

What is the budgeted accounts receivable balance on May 31?

Homework Answers

Answer #1

Collection pattern = 50% in the month of sale, 45% in the month following the sale and 5% in the second month following the sale.

Of April sales 50% are collected in May, 45% are collected in May and 5% will be collected in June which are Accounts receivable at the end of May.

Of May sales, 50% are collected in May and the remaining 50% (45%+5%) will be collected in June and July which are Accounts receivable at the end of May.

Silver Company

Accounts receivable at June 30

April sales

$6,200 ($124,000*5%)

May sales

$105,000 ($210,000*50%)

Total accounts receivable at May 30

$111,200

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