Silver Company makes a product that is very popular as a Mother’s Day gift. Thus

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:

April May June Total Budgeted sales (all on account) $500,000 $700,000 $240,000 $1,440,000

From past experience the company has learned hat 20% o a month's sales are collected inthe month ofsale, another 60% are collected in the month following sale and the remaining 20% are collected in the second month ollowing sale. Bad debts are negligible and can be ignored. ebruary sa s totaled $4 0 00 . and March ales tale 00. Required 1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter. Schedule of Expected Cash Collections April May June Total February sales March sales April sales May sales June sales Total cash collections 2. Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date May sales June sales Total accounts receivable at June 30

Explanation / Answer

1 Schedule of expecte cash collections April May June Total feb sales 430000*20% = 86000 0 0 Mar sales 460000*60% = 276000 460000*20% = 92000 0 April sales 500000*20% = 100000 500000*60% = 300000 500000*20% = 100000 May sales 0 700000*20% = 140000 700000*60% = 420000 June sales 0 0 240000*20% = 48000 Total cash collections 462000 532000 568000 1562000 2 Accounts receivable may sales 700000-140000-420000 = 140000 june sales 240000-48000 = 192000 total accounts receivable at june 30 332000

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