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 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 $260,000, and March sales totaled $290,000.

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

EXPECTED CASH COLLECTIONS APRIL MAY JUNE QUARTER Feb month sales 39,000 39,000 March Month Sales 174,000 43500 217,500 April Month Sales 82500 198000 49500 330,000 May Month Sales 132,500 318,000 450,500 June Month sales 52500 52,500 Total Cash Collections 295,500 374,000 420,000 1,089,500 Req 2: Accounts recivable as on June30: Recievable from may sales (15% of $530,000) 79500 Receivable from June sales (75% of $210,000) 157500 Total Accounts receivable 237000

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