The following is the cash collection model the company uses for its cash budget: 50% month of sale 40% month after sale 10% 2 months after sale The composition of the company's accounts receivable account balance of $65,000 on January 1st is as follows: $42,000 December sales $23,000 November sales. Show the budgeted total cash the company will collect in January?
llm
Answered on
Certainly! Let's break down the cash collections based on the composition of accounts receivable at the beginning of January.
For January, the company will collect cash according to the given percentages:
- From December sales:
- 50% collected in January (50% of $42,000) = $21,000
- From November sales:
- 40% collected in January (40% of $23,000) = $9,200
So, the total cash the company will collect in January from the accounts receivable balance is $21,000 + $9,200 = $30,200.