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

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.

#### Earn Coins

Coins can be redeemed for fabulous gifts.