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 $340,000, and March sales totaled $370,000.

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

Answer:-1)-

Explanation:-

2)-Accounts receivable on June 30:-

May month =$610000*15% =$91500

June month =$210000*75% =$157500

Statement of cash collection from debtors Particulars April May June Total Sales $ 410000 610000 210000 1230000 Cash Collection 25% in month of sale 410000*25% =102500 610000*25% =152500 210000*25% =52500 307500 60% in following month of sale 370000*60% =222000 410000*60% =246000 610000*60% =366000 834000 15% in the second month following sale 340000*15% =51000 370000*15% =55500 410000*15% =61500 168000 Total collection 375500 454000 480000 1309500

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