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|
What is the estimated amount of cash receipts from accounts receivable collections in December?
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.
|Prior to Nov.||$20,000|
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.
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Learn more about this topic:
from Finance 101: Principles of FinanceChapter 18 / Lesson 3