Reference no: EM132507904

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$195,000

Actual credit sales for April$251,000

Estimated credit sales for May$366,000

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:

Question 1: 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%.