Papst Company is preparing its cash budget for the month of May. The following i
ID: 2570371 • Letter: P
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):
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).
Recalculate requirements (1) and (2) under the assumption that estimated collections in the month of sale = 60% and in the first month following the month of sale = 25%.
May I please receive a step by step walkthrough for each part of the 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):
Explanation / Answer
Answer 1.
March Sales = $185,000
April Sales = $237,000
May Sales = $342,000
Cash receipts from Accounts Receivable collections = 25% of May Sales + 60% of April Sales + 10% of March Sales
Cash receipts from Accounts Receivable collections = 25%*$342,000 + 60%*$237,000 + 10%*$185,000
Cash receipts from Accounts Receivable collections = $246,200
Answer 2.
Gross Account Receivable at the end of May = 75% of May Sales + 15% of April Sales
Gross Account Receivable at the end of May = 75%*$342,000 + 15%*$237,000
Gross Account Receivable at the end of May = $292,050
Answer 3.
Allowance for Doubtful Accounts = 5%*April Sales + 5% of May Sales
Allowance for Doubtful Accounts = 5%*$237,000 + 5%*$342,000
Allowance for Doubtful Accounts = $28,950
Net Accounts Receivable at the end of May = Gross Account Receivable at the end of May - Allowance for Doubtful Accounts
Net Accounts Receivable at the end of May = $292,050 - $28,950
Net Accounts Receivable at the end of May = $263,100
Answer 4.
Cash receipts from Accounts Receivable collections = 60% of May Sales + 25% of April Sales + 10% of March Sales
Cash receipts from Accounts Receivable collections = 60%*$342,000 + 25%*$237,000 + 10%*$185,000
Cash receipts from Accounts Receivable collections = $282,950
Gross Account Receivable at the end of May = 40% of May Sales + 15% of April Sales
Gross Account Receivable at the end of May = 40%*$342,000 + 15%*$237,000
Gross Account Receivable at the end of May = $172,350
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