Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 25

Estimate Cash Collections

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

Estimated credit sales for December	$300,000
Actual credit sales for November	$225,000
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	$ 24,000
Estimated write-offs in December for uncollectible credit sales	$ 12,000
Estimated provision for bad debts in December for credit sales in December	$ 10,500

Required

What is the estimated amount of cash receipts from accounts receivable collections in December?

(CPA adapted)

Step 1 of 2

Cash budget refers to the estimation of cash inflows and outflows of a business entity during a particular time period. the time period may be 3 months, 6 months or one year. The main purpose of preparing cash budget is to make decisions by estimating the revenues and expenses during the period. cash budget helps to adjust the excess or shortage of funds occurred during the period.