Mitchell Company had the following budgeted sales for the first half of next yea
ID: 2450799 • Letter: M
Question
Mitchell Company had the following budgeted sales for the first half of next year:
Cash Sales/ Credit Sales
January $20,000 $120,000
February $25,000 $140,000
March $42,000 $100,000
April $47,000 $142,000
May $57,000 $170,000
June $50,000 $320,000
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 credit sales: 55% in month of sales 35% in month of following sales 10.0% in second month following sales Assume that the accounts receivable balance on January 1 was $66,000. Of this amount, $54,000 represented uncollected December sales and $12,000 represented uncollected November sales. Given these data, the total cash collected during January would be:
A. 120,000 B. 140,000 C. 178,000 D. 185,000
Explanation / Answer
Collection of January Sales = 55% of 120000 = 66000
Total of December Sales = 54000 / 0.45 = 120000
Collection of December Sales = 35% of 120000 = 42000
Collection of November sales = 12000
Total amount collected in January = 66000 + 42000 + 12000 = $120000