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 $ 48,000 $ 160,000 April $ 43,000 $ 128,000 May $ 53,000 $ 230,000 June $ 110,000 $ 220,000 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 $75,000, of which $47,000 represents uncollected December sales and $28,000 represents uncollected November sales. What is the budgeted accounts receivable balance on May 31

Answer 1

Answer:

Budgeted Accounts Receivable Balance on May 31 = $127,800

Explanation:

Accounts Receivables are current assets of a company resulting from selling on credit and these accounts are the uncollected, outstanding balances.

Judging by the collection schedule we can determine the budgeted Accounts Receivables (uncollected) balances at 31 May

The November balance equals to 10% of total Credit sales and 10 % of November sales are collected in January

the December balance equals 50% and 40% of the balance will be collected on January  and 10% collected in February.

Fast forward to the collection of May

details              credit sales              May         Uncollected

Mar               $160,000*10%         $16,000

April              $128,000 * 40%       $51,200  

                     $128,000 *10%                           $12,800

May               $230,000 *50%      $115,000

                     $230,000 *50%                        $115,000

TOTAL                                                             $127,800

The budgeted June sales at 31 May have not yet occurred so the balance accounts receivable at 31 May include only the uncollected percent from April and May.

Answer 2

The LaGrange budgeted Accounts Receivable Balance on May 31 is computed as follows:

10% of March credit sales $16,000 ($160,000 x 10%)

40% of April credit sales    51,200 ($128,000 x 40%)

50% of May credit sales  115,000 ($230,000 x 50%)

Total balance                 $182,200

Data and Calculations:

                Cash Sales    Credit Sales

January     $ 80,000         $ 180,000

February   $ 85,000        $ 200,000

March       $ 48,000         $ 160,000

April         $ 43,000         $ 128,000

May          $ 53,000        $ 230,000

June        $ 110,000        $ 220,000

Thus, at the end of the month of May, the Accounts Receivable Balance of The LaGrange Corporation is $182,200.

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