Silver Company makes a product that is very popular as a Mother’s Day gift. Thus
ID: 2545761 • 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 $340,000, and March sales totaled $370,000.
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) $410,000 $610,000 $210,000 $1,230,000Explanation / Answer
April
From February 340,000 x 15% = 51,000
From March 370,000 x 60% = 222,000
From April 410,000 x 25% = 102,500
Total Collected = $ 275,500
May
From March 370,000 x 15% = $ 55,500
From April 410,000 x 60% = $ 246,000
From May 610,000 x 25% = $ 152,500
Total Collected = $ 454,000
June
From April 410,000 x 15% = $ 61,500
From May 610,000 x 60% = $ 366,000
From June 210,000 x 25% = $ 52,500
Total Collected = $ 480,000
Accounts receivable at June 30
From May sales: $ 610,000 × 15% = $ 91,500
From June sales: $200,000 × (60% + 15%) = $ 150,000
Total accounts receivable at June 30 = $ 241,500
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