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FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2
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
Actual credit sales for April
Estimated credit sales for May
$145, 000
$181, 000
$246, 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%.
1
Estimated cash receipts
2
Gross accounts receivable
Net accounts receivable
4a. Estimated cash receipts
4b. Gross accounts receivable
Transcribed Image Text:2 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 Actual credit sales for April Estimated credit sales for May $145, 000 $181, 000 $246, 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%. 1 Estimated cash receipts 2 Gross accounts receivable Net accounts receivable 4a. Estimated cash receipts 4b. Gross accounts receivable
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