Question

The LaGrange Corporation had the following budgeted sales for the first half of the current year: Cash Sales Credit Sales January $ 30,000 $ 130,000 February $ 35,000 $ 150,000 March $ 36,000 $ 110,000 April $ 31,000 $ 116,000 May $ 41,000 $ 180,000 June $ 60,000 $ 100,000 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 40% in month following sale 10% in second month following sale The accounts receivable balance on January 1 of the current year was $72,000, of which $56,000 represents uncollected December sales and $16,000 represents uncollected November sales. The total cash collected during January by LaGrange Corporation would be:

Answer 1

Answer:

The total cash collected during January by Lagrange Corporation would be $155,800.

Explanation:

Total cash collection represent the sum of cash sales and credit sales

The total cash collection during January is shown below:

1. Cash sales -  $ 30,000

2. Based on the criteria of collection, the computation is given below:

Credit sales

50%  in month of sale i.e January = $ 130,000 × 50% = $65,000

40% in month following sale i.e December = ($56,000 × 40 ) ÷ 50 = $44800

10% in second month following sale i.e. November  = $16,000

Since, The December and November sales is not given, so we considered accounts receivable balance of December and November

For December sale = $56,000 is given in the question but 40% is considered so multiply by 40% and in January 50% is collection ,so for December we divide by 50% as it denotes remaining percentage

And for November, it is given in the question i.e. $16,000

Thus, the total sales = cash sales + credit sales of all three months

                                  =  $ 30,000 + $65,000 + $44800 + $16,000

                                  = $155,800

Hence, The total cash collected during January by Lagrange Corporation would be $155,800.