S A corporation is preparing its cash budget for the month of May. The ing infor

Question

S A corporation is preparing its cash budget for the month of May. The ing information is available concerning its accounts receivable ESTIMATED COLLECTIONS INFORMATION FOR MONTH OF MAY Estimated credit sales for May Actual credit sales for April Estimated collections in May for credit sales in May Estimated collections in May for credit sales in April Estimated collections in May for credit sales prior to S 500,000 450,000 30% 60% April S 40,000 Estimated write offs in May for uncollectible credit sales S 18,000 Estimated provision for bad debts in May for credit sales in May S 10,000 What are the estimated cash receipts from accounts receivable collections in May? (a) $432,000. (b) $442,000. (c) $460,000. (d) $420,000

Explanation / Answer

Answer is C. $ 460,000

The explanation is as follows:

Cash collections in May is as follows:

Cash collected for may credit sales (500,000*30%) = 150,000

Add: Cash collected for April sales (450,000*60%) =    270,000

Add: Cash collection for prior sales from April       =     40,000

Totalo expected cash collections for May             =     $ 460,000

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