Richards Corporation has the following budgeted sales for the first half of next

Question

Richards Corporation has the following budgeted sales for the first half of next year: 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 informal on has been assembled. The accounts receivable balance on January 1 is $65,000 Of this amount. $52,000 represents uncollected December sales and $13,000 represents uncollected November sales The total cash collected during January would be $204,400 $233,000 $281000 $104000

Explanation / Answer

Receivables on January 1 = $65,000 (uncollected)

of this collected in January,

December Sales = ($52,000/0.50)*35% = $36,400 (as only 35% of december sales will be collected in the month of January and $52,000 are uncollected portion i.e., remaining balance of total collection after collecting 50% in the month of December)

November Sales = $13,000 (being the uncollected portion 15% collected in January)

Total collection of From receivable on January 1 = $49,400

Collection of January Credit Sales = $85,000 (50% is collected in the month of sale)

Cash sale in the month of January = $70,000

Total Cash collected in the month of January = $204,400.

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