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$ 135,000Actual credit sales for April$ 167,000Estimated credit sales for May$ 222,000Estimated collections in the month of sale25%Estimated collections in the first month after the month of sale60%Estimated collections in the second month after the month of sale10%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.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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Answered: Papst Company is preparing its cash…

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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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%
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.

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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