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 $ 135,000 Actual credit sales for April $ 167,000 Estimated credit sales for May $ 222,000 Estimated collections in the month of sale 25%
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 $ 135,000 Actual credit sales for April $ 167,000 Estimated credit sales for May $ 222,000 Estimated collections in the month of sale 25%
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter8: Budgeting
Section: Chapter Questions
Problem 18E
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Question
Papst Company is preparing its
Actual credit sales for March | $ 135,000 |
---|---|
Actual credit sales for April | $ 167,000 |
Estimated credit sales for May | $ 222,000 |
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 |
5% |
The firm writes off all uncollectible accounts at the end of the second month after the month of sale.
Determine for Papst Company for the month of May:
- The estimated cash receipts from accounts receivable collections.
- The gross amount of accounts receivable at the end of the month after appropriate write-off of uncollectible accounts.
- The net amount of accounts receivable at the end of the month.
- 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%.
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VIEWStep 2: (1) Determine the estimated cash receipts from accounts receivable collections:
VIEWStep 3: (2) Determine the gross amount of accounts receivable at the end of the month:
VIEWStep 4: (3) Determine the net amount of accounts receivable at the end of the month:
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