The company is in the process of preparing a cash budget and must determine the
ID: 2461181 • Letter: T
Question
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:
Assume that the accounts receivable balance on January 1 was $77,000. Of this amount, $63,000 represented uncollected December sales and $14,000 represented uncollected November sales. Given these data, the total cash collected during January would be:
$140,000
$187,000
$200,000
$211,000
Mitchell Company had the following budgeted sales for the first half of next year:Explanation / Answer
The correct answer is $140,000.
Collections from sale
Calculation
Amount
Cash sales- January
Given
$ 40,000
Collections from the credit sales of January
$140,000*0.55
$ 77,000
Collections from the credit sales of December
$63,000*0.4
$ 25,200
Collections from the credit sales of November
$14,000*0.05
$ 700
$ 142,900
Note: Actual answer is $142,900 which is not given in the option but $142,900 is closed to first option of $140,000.
Collections from sale
Calculation
Amount
Cash sales- January
Given
$ 40,000
Collections from the credit sales of January
$140,000*0.55
$ 77,000
Collections from the credit sales of December
$63,000*0.4
$ 25,200
Collections from the credit sales of November
$14,000*0.05
$ 700
$ 142,900