Boone Co.'s sales, based on past experience, are 20% cash and 80% credit. Credit sales are typically collected as follows: 40% in the month of sale, 50% in the month after the sale, and 10% in the second month following month of sale. On December 31, the accounts receivable balance is $54,000, of which $12,000 is from November sales. Total sales for January and February are budgeted to be $100,000 and $120,000, respectively.What are Boone Co.'s budgeted cash receipts for January?
What will be an ideal response?
$99,000
1. January budgeted cash receipts from November credit sales = $12,000 (given)
2. December 31 accounts receivable balance from December sales = ($54,000 ? $12,000) = $42,000
3. December credit sales = (42,000/0.6) = $70,000
4. Portion of December credit sales expected to be collected in January = $42,000 ? $7,000 = $35,000
5. January's cash sales = (100,000 × 20%) = $20,000
6. January's credit sales = $100,000 ? $20,000 = $80,000
7. January cash receipts from January credit sales = ($80,000 × 40%) = $32,000
8. Total budgeted January cash receipts = Cash receipts in January from collection of a portion of November credit sales + Cash receipts in January from collection of a portion of December credit sales + January cash sales + Cash receipts from collection of a portion of January's credit sales = $12,000 + $35,000 + $20,000 + $32,000 = $99,000
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