Silver Company makes a product that is very popular as a Mother’s Day gift. Thus
ID: 2397972 • Letter: S
Question
Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak sales occur in May of each year, as shown in the company’s sales budget for the second quarter given below:
From past experience, the company has learned that 25% of a month’s sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 15% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $420,000, and March sales totaled $450,000.
Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak sales occur in May of each year, as shown in the company’s sales budget for the second quarter given below:
Explanation / Answer
Requirement - 1 Schedule of Expected Cash Collections
SILVER COMPANY
Schedule of Expected Cash Collections
April
May
June
Total
February sales
63,000
-
-
63,000
March sales
270,000
67,500
-
337,500
April sales
122,500
294,000
73,500
490,000
May sales
-
172,500
414,000
586,500
June sales
-
-
55,000
55,000
Total cash collections
455,500
534,000
542,500
1,532,000
Requirement - 2
SILVER COMPANY
Accounts Receivable as at June 30
May Sales [ 690,000 x 0.15 ]
103,500
June Sales [ 220,000 x 0.75 ]
165,000
Total Accounts Receivable as at June 30
268,500
SILVER COMPANY
Schedule of Expected Cash Collections
April
May
June
Total
February sales
63,000
-
-
63,000
March sales
270,000
67,500
-
337,500
April sales
122,500
294,000
73,500
490,000
May sales
-
172,500
414,000
586,500
June sales
-
-
55,000
55,000
Total cash collections
455,500
534,000
542,500
1,532,000
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