Question

Minot Corporation is preparing its cash budget for August. The following information is available concerning its accounts receivable: Estimated credit sales for August $ 220,000 Actual credit sales for July $ 167,000 Estimated collections in August for credit sales in August 25 % Estimated collections in August for credit sales in July 70 % Estimated collections in August for credit sales prior to July $ 18,000 Estimated write-offs in August for uncollectible credit sales $ 8,000 Estimated provision for bad debts in August for credit sales in August $ 7,800 Required: What is the estimated amount of cash receipts from accounts receivable collections in August?

Answer 1

$189,900

Explanation:

For computation of estimated amount of cash receipts from accounts receivable collections first we need to find out the credit sales in August and credit sales in July which is shown below:-

Credit sales in August = Estimated credit sales × Estimated collections in August for credit sales in August

= $220,000 × 25%

= $55,000

Credit sales in July = Actual credit sales × Estimated collections in August for credit sales in July

= $167,000 × 70%

= $116,900

Total estimated cash receipts from accounts receivable = Credit sales in August +Credit sales in July = Actual credit sales + Credit sales prior to July

= $55,000 + $116,900 + $18,000

= $189,900