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?

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