Question

The LaGrange Corporation had the following budgeted sales for the first half of the current year:

Cash Sales Credit Sales
January $ 80,000 $ 180,000
February $ 85,000 $ 200,000
March $ 46,000 $ 160,000
April $ 41,000 $ 126,000
May $ 51,000 $ 230,000
June $ 110,000 $ 200,000

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
50% in month following sale
5% in second month following sale
The accounts receivable balance on January 1 of the current year was $81,000, of which $55,000 represents uncollected December sales and $26,000 represents uncollected November sales.
The total cash collected during January by LaGrange Corporation would be ______.

Answer 1

The LaGrange Corporation

The total cash collected during January by LaGrange Corporation would be $237,000.

Step-by-step explanation:

January Collections:

1. January cash sales = $80,000

2. 45% January sales = $81,000

3. 50% December sales = $50,000 *

4. 5% November sales = $26,000

Total = $237,000

* Uncollected December sales = $55,000. This represents 55% (50% collectible in January and 5% collectible in February). Therefore January collection will be equal to $55,000/55 * 50 = $50,000.