Asked by Diana Mitrea Stoicescu on Jul 28, 2024
Verified
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:
A) $410,000
B) $254,000
C) $344,000
D) $331,500
Total Cash Collected
The sum of all cash received by a company during a specified period, including sales, accounts receivable collections, and other cash receipts.
Collections
The process of recovering the amounts owed to a business by its debtors or the action of receiving payments.
Accounts Receivable Balance
The total amount of money owed to a company by its customers for goods or services delivered or used but not yet paid for.
- Identify the importance of sales forecasting in the process of preparing a budget.
Verified Answer
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.
Learning Objectives
- Identify the importance of sales forecasting in the process of preparing a budget.
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