Question

Richards Corporation has the following budgeted sales for the first half of next year: Credit Sales Cash Sales $40,000 $45,000 $140,000 January February $160,000 $120,000 $40,000 $45,000 $55,000 $70,000 March April May $140,000 $190,000 $300,000 June 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: 40% In month of sales 45% In month of following sales 15.0% In second month following sales The accounts recelvable balance on January 1 Is $61,000. Of this amount, $51,000 represents uncollected December sales and $10,000 represents uncollected November sales. The total cash collected during January would be: O $144,250 $204,000 O $85,000 O $219,000

Answer 1

Cash collected during January:
Cash sales	$40000
Collection of January's credit sales (140000*40%)	56000
Collection of December's credit sales (51000*45%/60%)	38250
Collection of November's credit sales	10000
Total cash collected during January	$144250

As the November credit sales have been collected 40% in the November, 45% in December and the remaining 15% in January. And the uncollected November sales on January 1 is $1000. That means full $1000 has to be collected in January.

And the December credit sales have been collected 40% in December, 45% in January and 15% in February and the uncollected December sales on January 1 is $51000, which has to be collected in both January and February. So, the amount to be collected in January for December sales

= $51000*45%/60%= $38250

So, the answer is option A) $144250