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:

April May June Total

Budgeted sales (all on account) $410,000 $610,000 $210,000 $1,230,000

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?

Explanation / Answer

Answer:-1)-

Explanation:-

2)-The accounts receivable balance on June 30th:-

May month accounts receivable $610000*15% =$91500

June month accounts receivable $210000*75% =$157500

Total accounts receivable ob 30th june =$91500+$157500 =$249000

Silver Company Schedule of Expected Cash Collection From sales for the second quarter Particulars April May June Total $ $ $ Budgeted Sales (all on account) (a) 410000 610000 210000 1230000 Cash Collection 25% in month of quarter 410000*25%=102500 610000*25%=152500 210000*25%=52500 102500+153500+52500=308500 60% in following quarter of sale 370000*60%=222000 410000*60%=246000 610000*.60=366000 222000+246000+366000=834000 15% in the second month following sale 340000*15% = 51000 370000*15%=55500 410000*15%=61500 51000+55500+61500=168000 Total cash collection 375500 454000 480000 1310500

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