The LaGrange Corporation had the following budgeted sales for the first half of the current year: 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:60% in month of sale30% in month following sale10% in second month following saleThe 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 during January by LaGrange Corporation would be:

Question

The LaGrange Corporation had the following budgeted sales for the first half of the current year:  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:60% in month of sale30% in month following sale10% in second month following saleThe 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 during January by LaGrange Corporation would be:

Quizplus · Accepted Answer

We need to calculate the expected cash collection for the month of January.

Total budgeted sales for the first half year = $2,000,000

Sales for January = $1,000,000 (as per the given sales distribution)

Collections on January sales: 
60% in January = $600,000 
30% in February = $300,000 
10% in March = $100,000

Out of the accounts receivable balance on January 1: 
$50,000 represents uncollected December sales and 
$20,000 represents uncollected November sales.

Hence, the total cash collected during January would be:

=$50,000 (December sales) + $20,000 (November sales) + $600,000 (60% of January sales)

=$670,000

Therefore, the best choice is D.

The LaGrange Corporation Had the Following Budgeted Sales for the First