Exercise 7-1 Schedule of Expected Cash Collections [LO7-2] Silver Company makes

Question

Exercise 7-1 Schedule of Expected Cash Collections [LO7-2]

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 65% are collected in the month following sale, and the remaining 10% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $300,000, and March sales totaled $330,000.

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

     

Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date.

     

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

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

Account receivable on june 30 = (180000*75%+570000*10%) = 192000

April May June Quarter 25% of a month’s sales 92500 142500 45000 280000 65% are collected in the month following sale 214500 240500 370500 825500 10% are collected in the second month following sale 30000 33000 37000 100000 Total cash collection 337000 416000 452500 1205500

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