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10 October, 12:28

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

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  1. 10 October, 14:00
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    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.
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