Budgeted Cash Receipts Varsity Co. is preparing its cash budget for the month of

Question

Budgeted Cash Receipts

Varsity Co. is preparing its cash budget for the month of May. The following information on accounts receivable collections is available from Varsity's past collection experience:

75%

Credit sales are as follows:

What are the estimated collections of accounts receivable for May?

A step-by-step on how to solve the problem would be super helpful; a traditional method without using Excel or other computer programs would be appreciated, as we don't have access to those amenities for this class. Thank you!

Current month's sales 12% Prior month's sales

75%

Sales two months prior to current month 6% Sales three months prior to current month 4% Cash discounts taken 2% Doubtful accounts 1%

Explanation / Answer

Collections in May Current month's sales 12000 =100000*12% Prior month's sales 67500 =90000*75% Sales two months prior 4800 =80000*6% Sales three months prior 3800 =95000*4% Total 88100

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