Reference no: EM133440527

Question: Papst Company is preparing its cash budget for the month of May. The following information is available concerning its accounts receivable (based on sales made to customers on open account):

Actual credit sales for March $ 180,000
Actual credit sales for April $ 230,000
Estimated credit sales for May $ 330,000
Estimated collections in the month of sale 25%
Estimated collections in the first month after the month of sale 60%
Estimated collections in the second month after the month of sale 10%
Estimated provision for bad debts (made in the month of sale) 5%

The firm writes off all uncollectible accounts at the end of the second month after the month of sale.

Required:

Determine for Papst Company for the month of May:

1. The estimated cash receipts from accounts receivable collections.

2. The gross amount of accounts receivable at the end of the month (after appropriate write-off of uncollectible accounts).

3. The net amount of accounts receivable at the end of the month.

4. Recalculate requirements 1 and 2 under the assumption that estimated collections in the month of sale equal 60% and in the first month following the month of sale equal 25%.