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:

From past experience, the company has learned that 20% of a month’s sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 20% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $310,000, and March sales totaled $340,000.

Required:

1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

2. What is the accounts receivable balance on June 30th?

April May June Total Budgeted sales (all on account) $380,000 $580,000 $200,000 $1,160,000

Explanation / Answer

1.

2.

Silver Company Schedule of Expected Cash Collection April May June Total February Sales $310,000*20% = $62,000        62,000 March Sales $340,000*60% = $204,000 $340,000*20% = $68,000      272,000 April Sales $380,000*20% = $76,000 $380,000*60% = $228,000 $380,000*20% = $76,000      380,000 May Sales $580,000*20% = $116,000 $580,000*60% = $348,000      464,000 June Sale $200,000*20% = $40,000        40,000 Total Cash Collection $                                342,000 $                                412,000 $                                464,000 1,218,000

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