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

Exercise 26

Estimate Cash Collections

Nassau Products is preparing a cash budget for April. The following information on accounts receivable collections is available from past collection experience:

Percent of current month’s sales collected this month	25%
Percent of prior month’s sales collected this month	62
Percent of sales two months prior to current month collected this month	7
Percent of sales three months prior to current month collected this month	4

The remaining 2 percent is not collected and is written off as bad debts. Credit sales to date are:

April—estimated	$300,000
March	270,000
February	240,000
January	285,000

Required

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

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.