Alpha Company is preparing its cash budget for the month of May. The company est

Question

Alpha Company is preparing its cash budget for the month of May. The company estimated credit sales for May at $200,000. Actual credit sales for April were $150,000. Estimated collections in May for credit sales in May are 20%.   Estimated collections in May for credit sales in April are 70%. Estimated Collections in May for credit sales prior to April are $12,000. Estimated write-offs in May for uncollectible credit sales are $8,000. Estimated provision for bad debts in May for credit sales in May are $7,000. What are the estimated cash receipts from accounts receivable collections in May?

Explanation / Answer

Estimated cash receipts =
Estimated cash collection for May credit sales = $200000*0.20 = $40000
Estimated cash collection for April credit sales = $150000*0.70 = $105000
Estimated cash collection for sales prior to April = $12000
Total cash collection = $157000
Less: Estimated write-offs ($8000)
Less: Provision for bad debts ($7000)

Estimated cash receipts = $142000

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