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$130,000

Actual credit sales for April$160,000

Estimated credit sales for May$210,000

Estimated collections in the month of sale25%

Estimated collections in the first month after the month of sale60%

Estimated collections in the second month after the month of sale10%

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:

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 equal 60% and in the first month following the month of sale equal 25%

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