Papst Company is preparing its cash budget for the month of May. The following information is available concerning its accounts receivable (based on sales made to customers on open account):

Actual credit sales for March..............................................................130000

Actual credit sales for April...............................................................160000

Estimated credit sales for May............................................................210000

Estimated collections in the month of sale.....................................................25%

Estimated collections in the first month after the month of sale.............................60%

Estimated collections in the second month after the month of sale.........................10%

Estimated provision for bad debts (made in the month of sale)..............................5%

The firm writes off all uncollectible accounts at the end of the second month after the month of sale.

Required

Create an Excel spreadsheet and determine for Papst Company for the month of May:

1. The estimated cash receipts from accounts receivable collections.

2. The gross amount of accounts receivable at the end of the month (after appropriate write-off of uncollectible accounts).

3. The net amount of accounts receivable at the end of the month.

4. Recalculate requirements 1 and 2 under the assumption that estimated collections in the month of sale 5 60% and in the first month following the month of sale 5 25%.

5. What are the benefits and likely costs of moving to the situation described above in requirement (4)?