Reference: 07-05
The LaGrange Company had the following budgeted sales for the first half of the current year: $$\begin{array} { | l | l | l | }
\hline & \text { Cash Sales } & \text { Credit Sales } \
\hline \text { January } & \$ 70,000 & \$ 340,000 \
\hline \text { February } & 50,000 & 190,000 \
\hline \text { March } & 40,000 & 135,000 \
\hline \text { April } & 35,000 & 120,000 \
\hline \text { May } & 45,000 & 160,000 \
\hline \text { June } & 40,000 & 140,000 \
\hline
\end{array}$$ 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 credit sales: 60% in month of sale
30% in month following sale
10% in second month following sale
The accounts receivable balance on January 1 of the current year was $70,000, of which $50,000 represents uncollected December sales and $20,000 represents uncollected November sales.
-The total cash collected by LaGrange Company during January would be:
A)$331,500.
B)$344,000.
C)$410,000.
D)$254,000.

Question

Reference: 07-05
The LaGrange Company had the following budgeted sales for the first half of the current year: $$\begin{array} { | l | l | l | } 
\hline & \text { Cash Sales } & \text { Credit Sales } \
\hline \text { January } & \$ 70,000 & \$ 340,000 \
\hline \text { February } & 50,000 & 190,000 \
\hline \text { March } & 40,000 & 135,000 \
\hline \text { April } & 35,000 & 120,000 \
\hline \text { May } & 45,000 & 160,000 \
\hline \text { June } & 40,000 & 140,000 \
\hline
\end{array}$$ 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 credit sales: 60% in month of sale
30% in month following sale
10% in second month following sale
The accounts receivable balance on January 1 of the current year was $70,000, of which $50,000 represents uncollected December sales and $20,000 represents uncollected November sales.
-The total cash collected by LaGrange Company during January would be:
A)$331,500.
B)$344,000.
C)$410,000.
D)$254,000.

Quizplus · Accepted Answer

The total cash collected in January includes cash sales for January, collections on credit sales for January, and collections from previous months' credit sales. January cash sales are $70,000. Collections on January credit sales (60% of $340,000) are $204,000. Collections from December sales (30% of $50,000) are $15,000, and collections from November sales (10% of $20,000) are $2,000. Adding these amounts gives $70,000 + $204,000 + $15,000 + $2,000 = $291,000. The initial calculation was incorrect; the correct total cash collected in January is actually the sum of January's cash sales ($70,000), 60% of January's credit sales ($204,000), plus the collections from previous months' credit sales ($15,000 from December and $2,000 from November), which should correctly total $291,000, not $331,500 as initially stated. The error in the initial response was due to a miscalculation.

Reference: 07-05 the LaGrange Company Had the Following Budgeted Sales

Reference: 07-05
the LaGrange Company Had the Following Budgeted Sales