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:

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 $320,000, and March sales totaled $350,000.

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) $390,000 $590,000 $230,000 $1,210,000 Required 1 Required 2 Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter Schedule of Expected Cash Collections April May June Total February sales March sales April sales May sales June sales Total cash collections 0

Explanation / Answer

1) Schedule of Expected Cash collections April May June Total February Sales $     48,000 $       48,000 March Sales $ 2,10,000 $     52,500 $   2,62,500 April Sales $     97,500 $ 2,34,000 $     58,500 $   3,90,000 May Sales $ 1,47,500 $ 3,54,000 $   5,01,500 June Sales $     57,500 $       57,500 Total Cash collection $ 3,55,500 $ 4,34,000 $ 4,70,000 $ 12,59,500 Working: Collection of Sales: April: February Sales $   3,20,000 x 15% = $       48,000 March Sales $   3,50,000 x 60% = $   2,10,000 April Sales $   3,90,000 x 25% = $       97,500 $ 3,55,500 May: March Sales $   3,50,000 x 15% = $       52,500 April Sales $   3,90,000 x 60% = $   2,34,000 May Sales $   5,90,000 x 25% = $   1,47,500 $ 4,34,000 June: April Sales $   3,90,000 x 15% = $       58,500 May Sales $   5,90,000 x 60% = $   3,54,000 June Sales $   2,30,000 x 25% = $       57,500 $ 4,70,000 2) Total Accounts Receivable at June 30 $ 2,61,000 Working: May Sales $   5,90,000 x 15% = $       88,500 June Sales $   2,30,000 x 75% = $   1,72,500 $ 2,61,000

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