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 $ 33,000 $ 140,000
April $ 28,000 $ 113,000
May $ 38,000 $ 210,000
June $ 90,000 $ 70,000

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

30% in month following sale

25% in second month following sale

The accounts receivable balance on January 1 of the current year was $67,000, of which $55,000 represents uncollected December sales and $12,000 represents uncollected November sales.

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

  • $257,000

  • $205,000

  • $100,000

  • $174,000

Homework Answers

Answer #1

Calculation:

Based on the given information, Account receivable balance of November (in Jan 1 balance) should be collected fully in January

Account receivable balance of December (in Jan 1 balance) should be 55% of December credit sales and only 30% of December credit sales will be collected in January. The amount collected in January will be = $55,000 * 30%/55% = $30,000

January :

Cash sales = $60,000

Credit sales = $160,000

Hence,

Total cash collected during January = Cash sales in January + 45% of credit sales in January + Amount collected from November sales + Amount collected from December sales

= $60,000 + 45%* $160,000 + $12,000 + $30,000

=$174,000

Therefore, option 174,000 is correct.

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