# Duluth Company is preparing its cash budget for December. The following information is available...

## Question:

Duluth Company is preparing its cash budget for December. The following information is available concerning its accounts receivable:

 Estimated credit sales for December $240,00 Actual credit sales for November$181,000 Estimated collections in December for credit sales in December 25% Estimated collections in December for credit sales in November 70% Estimated collections in December for credit sales prior to November $20,000 Estimated write-offs in December for uncollectible credit sales$9,000 Estimated provision for bad debts in December for credit sales in December $8,700 Required: What is the estimated amount of cash receipts from accounts receivable collections in December? ## Cash Collection The amount of cash collected from credit sales is dependent upon the amount of credit sales, the terms of the credit sales, and the ability of the customer to pay according to those terms. ## Answer and Explanation: The answer is$206,700.

See the following table.

$60,000$126,700 $20,000$206,700 November December Credit Sales 100.0% $181,000$240,000 Current Month 25.0% \$45,250 Month Following 70.0% Prior to Nov. Collections

Assumption/Comment

Estimated write-offs would reduce remaining aged accounts receivable. The prior to November credit sales were estimated as being collectible.

The provision for bad debt does not impact collections.