Question

Fresh Company is preparing its cash budget for the month of May. The following information is available concerning its accounts receivable:

Estimated credit sales for May	$200,000
Actual credit sales for April	$150,000
Estimated collection in May for credit sales in May	20%
Estimated collection in May for credit sales in April	70%
Estimated collection in May for credit sales prior to April	$ 12,000
Estimated write-offs in May for uncollectible credit sales	$ 8,000
Estimated bad debts expense in May for credit sales in May	$ 7,000

Required:

What are the estimated cash receipts from accounts receivable collections in May?

Answer 1

Collections on account receivable

Sales can be made in cash or credit. In cash sales, cash receive at the time of sales. In credit sales, sales are made on credit where money receive after certain period of time. The money due to receive is classified under accounts receivable at the end of financial period.

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Following is the estimated cash receipts from accounts receivable collections in May:

Hence, the estimated cash receipts from accounts receivable collections in May is .

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Following show the calculation: